FINANCE

CASE STUDY

Major Medical Center

 

 

For the Major Medical Center financial statements on the following pages, complete the following:

a.       Read the auditor’s opinion letter. Are any flags raised?

b.      Review the financial statements. Search for unusual items. What things catch your eye on the balance sheet, operating statement, and cash flow statement?

c.       Review the Notes. Do any of them raise cause for concern?

d.      Calculate the following ratios: common size, current, quick, days of cash on hand, receivables turnover, average collection period, fixed asset turnover, total asset turnover, debt, debt to equity, times-interest-earned, operating margin, total margin, Return on assets (ROA), and Return on net assets(RONA).

e.       What do you think of Major Medical Center’s financial status?

 

 

I.N. SINCER AND OLD, CPAs

2650 East 38th Street

New York, New York 10089

 

Report of the Independent Auditors

 

Board of Trustees

Major Medical Center

 

We have audited the accompanying statements of financial position of Major Medical Center (the “Medical Center”) as of December 31, 2012 and 2011, and the related state of operation, changes in net assets, and cash flows for the years then ended. These financial statements are the responsibility of the Medical Centers management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Major Medical Center at December 31, 2012 and 2011, and the results of its operations, changes in net assets, and cash flows for the years then ended, in conformity with generally accepted accounting principles.

 

April 30, 2013

I.N. SINGER AND OLD, CPAs

 

Major Medical Center

            Statements of Financial Position

                                                December 31

                                                                                                                                  ____________________

                                                                                                                                    2012                2011

                                                                                                                                    (In Thousands)                        ____________________________________________________________________________________

            Assets

Current Assets

Cash and cash equivalents                                                                   8,065               $9,065

Assets limited as to use -compensating balance

for letters of credit                                                                            1,000               ____

Short-term investments                                                                                    1,387                 1,283

Receivables for patient care, net of allowance for

doubtful accounts (2012-$27,232; 2011-$31,934)                         49,719             47,614

Pledges receivable                                                                               1,814               2,205

Inventories, at average cost                                                                  1,690               2,326

Due from third-party reimbursement programs                                                6,539               ____

Receivables for government grants                                                      ___                  467

Other                                                                                                   2,234                           3,415

Total Current Assets                                                                            72,448              66,315

 

Assets limited as to use:

Sinking fund                                                                                        14,487             13,410

Compensating balance for standby letters   of credit                                923               ____

15,410             13,410

Long-term investments                                                                                                  1,132                 618

Due from affiliates, net                                                                                                 3,417               3,543

Pledges receivable, net of allowance for uncollectible pledges

(2012 – $2,218; 2011 – $4,453)                                                                         1,889               1,468

Property, plant, and equipment net                                                                  98,555             89,777

Deferred financing costs                                                                                    1,323               ____

Other                                                                                                                 2,065               1,043

                        $196,239       $176,174

Liabilities and Net Assets

Current Liabilities

Current portion of long-term debt                                                       $11,608                  $11,488

Accounts payable and accrued expenses                                                         29,489         25,311                 Accrued salaries and related liabilities                                                             25,572        20,096

Due to third-party reimbursement programs, net                                                ____           1,874

Advances on government grants                                                             1,587           ___

Total Current liabilities                                                                                    68,256        58,769

 

Long term debt, less current portion                                                                55,539                        47,709

Accrued post-retirement benefits                                                                        6,023                          6,017

Other noncurrent liabilities                                                                               16,445                        17,014

Total Liabilities                                                                                                            146,263           129,509

Commitments and contingencies

 

Net Assets

Unrestricted                                                                                         40,582             38,014            Temporarily restricted                                                                             8,262                          7,519            Permanently restricted                                                                            1,132                          1,132                         Total Net Assets                                                                          49,976              46,665

                                                                                                                                  $196,239          $176,174                  __________________________________________________________________________________

See accompanying notes.

 

 

Major Medical Center

   Statements of Operations   

 

_______________________________________________________________________________

Year ended December 31                                                                                                                   _______________________

2012                2011

_______________________

(In Thousands)

______________________________________________________________________________

            Operating Revenue                 

Net patient service revenue                                                                  $402,921         369,512

Other revenue                                                                                          13,356           13,850

Net assets released from restrictions                                                    __ 4,708                2,863

Total Operating Revenue                                                            420,985           386,225

            Operating Expenses                                                                            

Salaries and wages                                                                               207,141           196,453

Employee benefits                                                                                 44,456                        44,860

Supplies and expenses                                                                         137,505                         117,838            Depreciation and amortization                                                               22,541                         18,856            Research                                                                                                  2,457                            2,214

Interest                                                                                                    4,456                            5,253

Total Operating Expenses                                                        418,556                          385,474                   

Operating Income                                                                                    2,429                                 751

Net assets released from restrictions used for capital acquisitions                         139                        146

Increases in unrestricted net assets                                                       $2,568                                $897

________________________________________________________________________________

See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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