Question

Review the more common financial ratios in table 2-1. Which ratios do you think are the most important with evaluating the short-term cash needs of a facility? (I have attached the image of table 2-1)

rs Concept Two: Analyzing and Boosting Creditwortbiness TABLE 2-1. Key Creditworthiness Ratios Financial Ratio Indicator Total operating revenue- Ope Tt Operating margin rating expenses Total operating revenue ome from operations + Nonoperating revenue Excess margin Total operating + Nonoperating revenue Operating EBIDA margin Operating income + Interest + Depreciation + Amortization Total operating revenue Cash + Marketable securities + Board-designated funds x 365 Days cash on hand Total operating expenses - Depreciation Amo rti zation Cash +Marketable securities + Board-designated funds Long-term debt + Short-term debt Cash-to- debt ratio Cash + Marketable securities + Board-designated funds Maximum annual debt service Cushion ratio Excess revenue over expenses + Depreciation + Interest+ Amortization Annual debt service Debt-service coverage ratio Long-term debt (less current portion) Long-term debt (less current portion) + Unrestricted net assets Debt-to- capitalization ratio Accumulated depreciation Annual depreciation Average age of plant Capital expenditures (additions to property, plant, and equipment) Depreciation expense Capital spending ratio Source: Kaufman, Hall& Associates, Inc. Used with permission.

Answer 1

Most important with evaluating the short-term cash needs of a facility would include:

• Days Cash on Hand.
• Operating EBIDA Margin.
• Operating Margin.
• Excess Margin.
• Cash Cushion & Cash to Debt Ratio.