Question

Evaluate the financial stability of Webster Health Systems and Midcare in terms of Accounts Receivable (AR), Days of Cash on Hand, Return on Assets (ROA), Current Ratio, and Debt Ratios. Does both hospitals appear to be financially stable? Webster Health Systems Current Ratio is 2.11. Days Cash on Hand is 10.45. Days in AR is 56.11, ROA is 5.94%, and Debt Ratio is 52.86%. Midcare's Current Ratio is 2.05. Midcare's Days Cash on Hand is 20.35. Its AR is 64.25. The ROA is 3.50. Midcare's Debt Ratio is 42%.

Answer 1

Answer: Analysis of Webster Health Systems and Midcare-

Ratios	Webster	Midcare	Analysis
Current Ratio	2.11	2.05	Current ratio is the liquidity measure, we can see that both companies are highly liquid because their current ratios are above 2. Webster is little more liquid than Midcare.
Days cash on hand	10.45	20.35	This ratio tells the number of days, an organization can continue to pay its operating expenses. Midcare takes more days to pay its operating expenses rather than Webster.
Days in AR	56.11	64.25	This ratio tells the number of days, a customer's invoice is outstanding. Webster collects the payment of account receivables faster than Midcare. Midcare's credit policy is a bit liberal.
ROA	5.94%	3.5	This ratio tells the return on assets.Webster's ROA is higher than Midcare's it means Webster utilizes its assets more efficiently in generating return.
Debt Ratio	52.86%	42%	This ratio tells how much leverage a company has. Webster is higher leveraged company than Midcare.