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Creek Side Community Hospital – Financial Forecasting, Essay Example
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This demonstrates a general financial and operating scrutiny of Creek side Community Hospital. The case necessitates many assumptions about future events at the hospital.
Input Data: | Key Output: | |||||||||||||||||
2005 | 2006 | 2010 | ||||||||||||||||
Debt interest rate | 8.0% | Op margin | 6.8% | 7.0% | 8.1% | |||||||||||||
ROA | 4.5% | 4.8% | 6.0% | |||||||||||||||
Debt ratio | 40.9% | 40.2% | 36.0% | |||||||||||||||
ROE | 7.7% | 8.1% | 9.4% | |||||||||||||||
Current ratio | 2.67 | 2.67 | 2.67 | |||||||||||||||
Cumulative external funds = | $3.570 | |||||||||||||||||
(in millions) | ||||||||||||||||||
Consolidated Statements of Revenues and Expenses: | ||||||||||||||||||
(Millions of Dollars) | ||||||||||||||||||
Growth Rate | Initial | Final | Initial | Final | Initial | Final | Initial | Final | Initial | Final | ||||||||
Revenues | 2001 | 2002 | 2003 | 2004 | 2005 | Forecast | 2006 | 2006 | 2007 | 2007 | 2008 | 2008 | 2009 | 2009 | 2010 | 2010 | ||
Net patient service revenue | $25.661 | $27.236 | $28.796 | $30.576 | $34.576 | 10.0% | $38.034 | $38.034 | $41.837 | $41.837 | $46.021 | $46.021 | $50.623 | $50.623 | $55.685 | $55.685 | ||
Other revenue | 1.305 | 1.261 | 1.237 | 1.853 | 1.834 | 10.0% | $2.017 | $2.017 | $2.219 | $2.219 | $2.441 | $2.441 | $2.685 | $2.685 | $2.954 | $2.954 | ||
Total revenues | $26.966 | $28.497 | $30.033 | $32.429 | $36.410 | NA | $40.051 | $40.051 | $44.056 | $44.056 | $48.462 | $48.462 | $53.308 | $53.308 | $58.639 | $58.639 | ||
Expenses | ||||||||||||||||||
Salaries and wages | $10.829 | $11.135 | $12.245 | $12.468 | $13.994 | 10.0% | $15.393 | $15.393 | $16.933 | $16.933 | $18.626 | $18.626 | $20.489 | $20.489 | $22.537 | $22.537 | ||
Fringe benefits | 1.496 | 1.731 | 1.830 | 2.408 | 2.568 | 10.0% | 2.825 | 2.825 | 3.107 | 3.107 | 3.418 | 3.418 | 3.760 | 3.760 | 4.136 | 4.136 | ||
Interest expense | 1.341 | 1.305 | 1.181 | 1.598 | 1.776 | NA | 1.776 | 1.842 | 1.842 | 1.905 | 1.905 | 1.963 | 1.963 | 2.016 | 2.016 | 2.062 | ||
Depreciation | 1.708 | 1.977 | 2.350 | 2.658 | 2.778 | 10.0% | 3.056 | 3.056 | 3.361 | 3.361 | 3.698 | 3.698 | 4.067 | 4.067 | 4.474 | 4.474 | ||
Provision for bad debts | 0.546 | 0.589 | 0.622 | 0.655 | 0.776 | 10.0% | 0.854 | 0.854 | 0.939 | 0.939 | 1.033 | 1.033 | 1.136 | 1.136 | 1.250 | 1.250 | ||
Professional liability | 0.102 | 0.157 | 0.140 | 0.201 | 0.218 | 10.0% | 0.240 | 0.240 | 0.264 | 0.264 | 0.290 | 0.290 | 0.319 | 0.319 | 0.351 | 0.351 | ||
Other | 7.874 | 8.389 | 9.036 | 10.339 | 11.848 | 10.0% | 13.033 | 13.033 | 14.336 | 14.336 | 15.770 | 15.770 | 17.347 | 17.347 | 19.081 | 19.081 | ||
Total expenses | $23.896 | $25.283 | $27.404 | $30.327 | $33.958 | NA | $37.176 | $37.242 | $40.782 | $40.845 | $44.739 | $44.797 | $49.081 | $49.134 | $53.845 | $53.891 | ||
Excess of revenues over expenses | $3.070 | $3.214 | $2.629 | $2.102 | $2.458 | NA | $2.875 | $2.809 | $3.274 | $3.211 | $3.723 | $3.664 | $4.227 | $4.174 | $4.793 | $4.748 | ||
Consolidated Balance Sheets: | ||||||||||||||||||
Growth Rate | Initial | Final | Initial | Final | Initial | Final | Initial | Final | Initial | Final | ||||||||
2001 | 2002 | 2003 | 2004 | 2005 | Forecast | 2006 | 2006 | 2007 | 2007 | 2008 | 2008 | 2009 | 2009 | 2010 | 2010 | |||
Assets | ||||||||||||||||||
Cash and investments | $3.513 | $5.799 | $4.673 | $5.069 | $2.795 | NA | $3.075 | $3.075 | $3.382 | $3.382 | $3.720 | $3.720 | $4.092 | $4.092 | $4.501 | $4.501 | ||
Patient accts rec (net) | 5.915 | 4.832 | 4.359 | 5.674 | 7.413 | 10.0% | 8.154 | 8.154 | 8.970 | 8.970 | 9.867 | 9.867 | 10.853 | 10.853 | 11.939 | 11.939 | ||
Inventories | 0.338 | 0.403 | 0.432 | 0.523 | 0.601 | 10.0% | 0.661 | 0.661 | 0.727 | 0.727 | 0.800 | 0.800 | 0.880 | 0.880 | 0.968 | 0.968 | ||
Other current assets | 0.693 | 0.294 | 0.308 | 0.703 | 0.923 | 10.0% | 1.015 | 1.015 | 1.117 | 1.117 | 1.229 | 1.229 | 1.351 | 1.351 | 1.487 | 1.487 | ||
Total current assets | $10.459 | $11.328 | $9.772 | $11.969 | $11.732 | NA | $12.905 | $12.905 | $14.196 | $14.196 | $15.615 | $15.615 | $17.177 | $17.177 | $18.895 | $18.895 | ||
Gross plant and equipment | $37.999 | $42.005 | $47.786 | $55.333 | $59.552 | 10.0% | $65.507 | $65.507 | $72.058 | $72.058 | $79.264 | $79.264 | $87.190 | $87.190 | $95.909 | $95.909 | ||
Accumulated depreciation | 8.831 | 10.092 | 11.820 | 14.338 | 17.009 | NA | 20.065 | 20.065 | 23.426 | 23.426 | 27.124 | 27.124 | 31.191 | 31.191 | 35.665 | 35.665 | ||
Net plant and equipment | $29.168 | $31.913 | $35.966 | $40.995 | $42.543 | NA | $45.442 | $45.442 | $48.632 | $48.632 | $52.140 | $52.140 | $55.999 | $55.999 | $60.244 | $60.244 | ||
Total assets | $39.627 | $43.241 | $45.738 | $52.964 | $54.275 | NA | $58.348 | $58.348 | $62.827 | $62.827 | $67.755 | $67.755 | $73.176 | $73.176 | $79.139 | $79.139 | ||
Liabilities and Fund Balance | ||||||||||||||||||
Accounts payable | $1.068 | $1.273 | $0.928 | $1.253 | $1.760 | 10.0% | $1.936 | $1.936 | $2.130 | $2.130 | $2.343 | $2.343 | $2.577 | $2.577 | $2.834 | $2.834 | ||
Accruals | 0.692 | 0.942 | 1.460 | 1.503 | 1.176 | 10.0% | 1.294 | 1.294 | 1.423 | 1.423 | 1.565 | 1.565 | 1.722 | 1.722 | 1.894 | 1.894 | ||
Current portion of LT debt | 0.136 | 0.290 | 0.110 | 1.341 | 1.465 | 10.0% | 1.612 | 1.612 | 1.773 | 1.773 | 1.950 | 1.950 | 2.145 | 2.145 | 2.359 | 2.359 | ||
Total current liabilities | $1.896 | $2.505 | $2.498 | $4.097 | $4.401 | NA | $4.841 | $4.841 | $5.325 | $5.325 | $5.858 | $5.858 | $6.444 | $6.444 | $7.088 | $7.088 | ||
Long-term debt | $15.959 | $15.775 | $15.673 | $19.222 | $17.795 | NA | $17.795 | $18.619 | $18.619 | $19.403 | $19.403 | $20.134 | $20.134 | $20.795 | $20.795 | $21.365 | ||
Net assets (Equity) | 21.772 | 24.961 | 27.567 | 29.645 | 32.079 | NA | 34.954 | 34.888 | 38.162 | 38.099 | 41.822 | 41.763 | 45.991 | 45.938 | 50.731 | 50.685 | ||
Total liabilities and funds | $39.627 | $43.241 | $45.738 | $52.964 | $54.275 | NA | $57.590 | $58.348 | $62.106 | $62.827 | $67.083 | $67.755 | $72.568 | $73.176 | $78.614 | $79.139 | ||
External funds needed | $0.758 | $0.824 | $0.722 | $0.785 | $0.673 | $0.731 | $0.608 | $0.661 | $0.525 | $0.571 | ||||||||
Additional LT debt | $0.758 | $0.824 | $0.722 | $0.785 | $0.673 | $0.731 | $0.608 | $0.661 | $0.525 | $0.571 | ||||||||
Added interest exp | $0.061 | $0.066 | $0.058 | $0.063 | $0.054 | $0.058 | $0.049 | $0.053 | $0.042 | $0.046 | ||||||||
Cumulative external funds = | $3.570 | |||||||||||||||||
Consolidated Statements of Cash Flows: | ||||||||||||||||||
(Millions of Dollars) | ||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||
Cash Flow From Operations | ||||||||||||||||||
Income from operations | $3.214 | $2.629 | $2.102 | $2.458 | $2.809 | $3.211 | $3.664 | $4.174 | $4.748 | |||||||||
Noncash expenses | 1.952 | 2.326 | 2.633 | 2.756 | 3.056 | 3.361 | 3.698 | 4.067 | 4.474 | |||||||||
Change in NWC (ex cash) | 2.026 | 0.423 | (0.202) | (1.733) | (0.454) | (0.499) | (0.549) | (0.604) | (0.664) | |||||||||
Net cash flow from operations | $7.192 | $5.378 | $4.533 | $3.481 | $5.411 | $6.074 | $6.813 | $7.638 | $8.557 | |||||||||
Cash Flow From Investing | ||||||||||||||||||
Fixed asset acquisitions | ($4.722) | ($6.402) | ($7.686) | ($4.328) | ($5.955) | ($6.551) | ($7.206) | ($7.926) | ($8.719) | |||||||||
Cash Flow From Financing | ||||||||||||||||||
Long-term debt | ($0.184) | ($0.102) | $3.490 | ($1.427) | $0.824 | $0.785 | $0.731 | $0.661 | $0.571 | |||||||||
Net Increase (Decrease) In Cash | $2.286 | ($1.127) | $0.395 | ($2.273) | $0.279 | $0.307 | $0.338 | $0.372 | $0.409 | |||||||||
Beginning Cash/Investments | 3.513 | 5.799 | 4.673 | 5.069 | 2.795 | 3.075 | 3.382 | 3.720 | 4.092 | |||||||||
Ending Cash/Investments | $5.799 | $4.672 | $5.068 | $2.796 | $3.074 | $3.382 | $3.720 | $4.092 | $4.501 | |||||||||
Cash account check | $3.075 | $3.382 | $3.720 | $4.092 | $4.501 | |||||||||||||
Note: The historical statements of cash flows are somewhat different than would be calculated | ||||||||||||||||||
From the income statements and balance sheets due to accounting complexities not shown. | ||||||||||||||||||
Financial Statement Analysis: Du Pont Analysis | ||||||||||||||||||
Industry | ||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | Median | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||
Total margin | 11.38% | 11.28% | 8.75% | 6.48% | 6.75% | 3.48% | 7.01% | 7.29% | 7.56% | 7.83% | 8.10% | |||||||
Total asset turnover | 0.68 | 0.66 | 0.66 | 0.61 | 0.67 | 0.89 | 0.69 | 0.70 | 0.72 | 0.73 | 0.74 | |||||||
ROA = TM x TATO | 7.75% | 7.43% | 5.75% | 3.97% | 4.53% | 3.10% | 4.81% | 5.11% | 5.41% | 5.70% | 6.00% | |||||||
Equity multiplier | 1.82 | 1.73 | 1.66 | 1.79 | 1.69 | 1.94 | 1.67 | 1.65 | 1.62 | 1.59 | 1.56 | |||||||
ROE = ROA x Equity multiplier | 14.10% | 12.88% | 9.54% | 7.09% | 7.66% | 6.01% | 8.05% | 8.43% | 8.77% | 9.09% | 9.37% | |||||||
Check ROE (Excess/Net equity) | 14.10% | 12.88% | 9.54% | 7.09% | 7.66% | 8.05% | 8.43% | 8.77% | 9.09% | 9.37% | ||||||||
Financial Statement Analysis: Ratios | ||||||||||||||||||
Industry | ||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | Median | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||
Profitability Ratios: | ||||||||||||||||||
Total margin | 11.38% | 11.28% | 8.75% | 6.48% | 6.75% | 3.48% | 7.01% | 7.29% | 7.56% | 7.83% | 8.10% | |||||||
Return on assets | 7.75% | 7.43% | 5.75% | 3.97% | 4.53% | 3.10% | 4.81% | 5.11% | 5.41% | 5.70% | 6.00% | |||||||
Return equity | 14.10% | 12.88% | 9.54% | 7.09% | 7.66% | 6.01% | 8.05% | 8.43% | 8.77% | 9.09% | 9.37% | |||||||
Liquidity Ratios: | ||||||||||||||||||
Current ratio | 5.52 | 4.52 | 3.91 | 2.92 | 2.67 | 1.99 | 2.67 | 2.67 | 2.67 | 2.67 | 2.67 | |||||||
Days cash on hand | 57.79 | 90.82 | 68.08 | 66.87 | 32.72 | 15.89 | 32.83 | 32.93 | 33.04 | 33.14 | 33.25 | |||||||
Debt Management Ratios: | ||||||||||||||||||
Debt ratio | 45.06% | 42.27% | 39.73% | 44.03% | 40.90% | 48.40% | 40.21% | 39.36% | 38.36% | 37.22% | 35.95% | |||||||
LT debt to equity | 73.30% | 63.20% | 56.85% | 64.84% | 55.47% | 64.70% | 53.37% | 50.93% | 48.21% | 45.27% | 42.15% | |||||||
Times interest earned | 3.29 | 3.46 | 3.23 | 2.32 | 2.38 | 2.23 | 2.53 | 2.69 | 2.87 | 3.07 | 3.30 | |||||||
Fixed charge coverage | 2.99 | 2.83 | 2.95 | 1.26 | 1.31 | 1.35 | 1.35 | 1.39 | 1.44 | 1.49 | 1.54 | |||||||
Cash flow coverage | 4.24 | 4.44 | 4.66 | 3.53 | 3.52 | 3.22 | 3.70 | 3.91 | 4.14 | 4.39 | 4.68 | |||||||
Asset Management Ratios: | ||||||||||||||||||
Inventory turnover | 75.92 | 67.58 | 66.66 | 58.46 | 57.53 | 63.95 | 57.53 | 57.53 | 57.53 | 57.53 | 57.53 | |||||||
Current asset turnover | 2.45 | 2.40 | 2.95 | 2.55 | 2.95 | 3.38 | 2.95 | 2.95 | 2.95 | 2.95 | 2.95 | |||||||
Fixed asset turnover | 0.88 | 0.85 | 0.80 | 0.75 | 0.81 | 1.76 | 0.84 | 0.86 | 0.88 | 0.90 | 0.92 | |||||||
Total asset turnover | 0.65 | 0.63 | 0.63 | 0.58 | 0.64 | 0.89 | 0.65 | 0.67 | 0.68 | 0.69 | 0.70 | |||||||
Avg collection period | 84.13 | 64.76 | 55.25 | 67.73 | 78.26 | 75.67 | 78.26 | 78.26 | 78.26 | 78.26 | 78.26 | |||||||
Average payment period | 31.19 | 39.23 | 36.39 | 54.05 | 51.52 | 56.52 | 51.69 | 51.85 | 52.02 | 52.19 | 52.35 | |||||||
Other Ratios: | ||||||||||||||||||
Average age of plant | 5.17 | 5.10 | 5.03 | 5.39 | 6.12 | 7.39 | 6.57 | 6.97 | 7.34 | 7.67 | 7.97 | |||||||
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