Question

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2017 2018 Revenues: Net patient service revenue Premium revenue $150,118 18,782 3,079 $171,979 $123,565 16,455 2,704 $142,724 Other revenue Total revenues Expenses: $102,224 $126,223 20,568 18,673 Salaries and benefits Supplies Insurance Lease Depreciation Provision for bad debts 4,518 3,189 6,405 2,000 5,329 $168,232 $3,747 3,710 2,603 5,798 1,800 3,476 $138,394 $4,330 Interest Total expenses Operating income Non-operating income: Contributions Investment income Total non-operating income $243 3,870 $4,113 $7,860 $198 3,678 $3,876 Net income $8,206

Question 1. A. What is the total profit margin for Almashfa Clinic for the year 2018?

2. What does this information mean when compared to the ratio from the year 2017?

Question 2. A. What is the operating margin for Almashfa Clinic for the year 2018?

2. What does this information mean when compared to the ratio from the year 2017

Answer 1

1.

1. Given,

Particulars	2017	2018
Total Revenue	$ 171,979	$ 142,724
Net income	$ 7,860	$ 8,206
Profit Margin (b/a*100)	4.57 %	5.74 %

2. The analysis of ratio computation is as below

• The profit margin ratio for 2018, 5.74 % is greater than that of 2017 which is 4.57 %.
• This indicates that the financial performance of Almashfa Clinic for the year 2018 is much more satisfactory compared to that of year 2017.
• Even though the revenue for the year 2018 is less than the revenue for the year 2017, the expenses are much more lesser in 2018, which implied in higher profit for the year 2018. This indicates that Almashfa Clinic is much efficient in controlling its costs.
• However, Almashfa Clinic must take care of the quality of services while they control their costs.

2.

A.   Given,

       

Particulars	2017	2018
Operating income	$ 3,747	$ 4,330
Provision for bad debts	$ 2,000	$ 1,800
Interest	$ 5,329	$ 3,476
Operating profit (a+b+c)	$ 11,076	$ 9,606
Total Revenue	$ 171,979	$ 142,724
Operating Margin (d/e*100)	6.44 %	6.73 %

2. The analysis of ratio computation is as below

• The Operating margin ratio of 2018, 6.73 % is greater than that of 2017 which is 6.44 %.
• This indicates that even the Operative financial performance of Almashfa Clinic for the year 2018 is much more satisfactory compared to that of year 2017.
• Even though the revenue for the year 2018 is less than the revenue for the year 2017, the expenses are much more lesser in 2018, which implied in higher profit for the year 2018. This indicates that Almashfa Clinic is much efficient in controlling its costs.
• As the Almashfa Clinic has reduced its salary cost and supplies to a greater extent, Clinic must take a proper care towards the quality of services neglecting which may lead to reduction of revenue in the succeeding years.