Question

Cambridge Hospital: What is the Operating Margin, Days Cash on Hand, Days in Accounts Receviable, and Current Ratio

Cambridge Hospital Balance Sheet as of December 31, 2012 Current Assets Cash and cash equivalents Marketable securities Accounts receivable less allowances Inventories at cost Other current assets Total Current Asset 2012 $ 278,750 $ 1,200,500 $11,250,000 $ 3,368,000 $ 992,500 $17,089,750 Land and improvements Buildings Fixed equipment Moveable equipment Property, Plant & Equipment Less Accumulated Depreciation Total Plant, Property and Equipment $ 3,250,000 $36,485,750 $ 8,063,250 $ 4,466,750 $52,265,750 $11,580,750 $40,685,000 Total Assets $57,774,750 Liabilities and Net Assets Current Liabilities Current portion of long-term debt Accounts Payable and accrued expenses Estmated due to third party payers Other current liabilities Total Current Liabilities FY 2012 FY 2013 FY 2014 FY 2015 $ 2,151,000 $ 5,400,000 $ 1,423,750 $ 1,500,000 $10,474,750 Sheet3 Sheet2 Type here to search O te we

Answer 1

1. Current Ratio = Current Assets/Current Liablities

Current Assets = 17,089,750, Current Liablities = 10,474,750

Current Ratio = 17,089,750/10,474,750 = 1.63

2. Days cash on hand = (Unrestricted Cash & Equivalents x 365 Days) / (Total Operating Expenses ‐ Annual Depreciation)

3. Days in accouts receivable = Number of days in a year/Accouts receivable turnover ratio

Account Receivable turnover ratio = Net Credit Sale/Average accouts receivable.

4. Operating Margin = Net Sales - Operating Expenses.

Further, to provide the solution to the above mentioned parts (2,3,4) we require some more information of the Profit & Loss Account.