HCAD 760 - MODULE 3 QUESTIONS & ANSWERS
Profitability - Answer -Is the business generating sufficient profits?
Liquidity - Answer -Can the business meet its cash obligations?
Debt management - Answer -Is the business using the right mix of debt and equity?
Asset management - Answer -Does the business have the right amount of assets for its
patient volume?
If you were a vendor, what type of ratios would you be most interested in? - Answer -
liquidity, profitability
Every ratio that was used in homework, need to know - Answer -
Return on assets equation? - Answer -ROA = Net income / total assets Ex: For every
dollar invested in assets, the hospital generated X in net profit.
Total margin equation? - Answer -Total margin = net income / total revenue
What is total margin saying? - Answer -It is saying that out of each dollar in total
revenue, the business has generated X in net profits.
Return on equity equation? - Answer -ROE = net income / total equity Ex: For every
dollar invested by the owners or the community, the hospital generated X in net profit.
Current ratio equation? - Answer -CR = current assets / current liabilities
What is the current ratio saying? - Answer -The current ratio is saying that the hospital
has X amount of current assets for every dollar owed in current liabilities.
Days cash on hand - Answer -DCOH = cash + short term investments / cash expenses
divided by 365
What does the days cash on hand indicate? - Answer -This indicates how many days of
cash available to cover cash expenses.
Debt ratio equation? - Answer -Debt ratio = total debt / total assets (TD/TA)
What does the debt ratio equation indicate? - Answer -The debt equation ratio indicates
the percentage of assets that the organization has financed by debt
Is a lower or higher debt ratio better? - Answer -Lower is better
Profitability - Answer -Is the business generating sufficient profits?
Liquidity - Answer -Can the business meet its cash obligations?
Debt management - Answer -Is the business using the right mix of debt and equity?
Asset management - Answer -Does the business have the right amount of assets for its
patient volume?
If you were a vendor, what type of ratios would you be most interested in? - Answer -
liquidity, profitability
Every ratio that was used in homework, need to know - Answer -
Return on assets equation? - Answer -ROA = Net income / total assets Ex: For every
dollar invested in assets, the hospital generated X in net profit.
Total margin equation? - Answer -Total margin = net income / total revenue
What is total margin saying? - Answer -It is saying that out of each dollar in total
revenue, the business has generated X in net profits.
Return on equity equation? - Answer -ROE = net income / total equity Ex: For every
dollar invested by the owners or the community, the hospital generated X in net profit.
Current ratio equation? - Answer -CR = current assets / current liabilities
What is the current ratio saying? - Answer -The current ratio is saying that the hospital
has X amount of current assets for every dollar owed in current liabilities.
Days cash on hand - Answer -DCOH = cash + short term investments / cash expenses
divided by 365
What does the days cash on hand indicate? - Answer -This indicates how many days of
cash available to cover cash expenses.
Debt ratio equation? - Answer -Debt ratio = total debt / total assets (TD/TA)
What does the debt ratio equation indicate? - Answer -The debt equation ratio indicates
the percentage of assets that the organization has financed by debt
Is a lower or higher debt ratio better? - Answer -Lower is better
