Your Assignment should show effective application of triangulation of content and resources
Your Assignment should show effective application of triangulation of content and resources in your conclusion and
recommendations.
The Assignment
Using the scenarios and financial data provided in the Week 7 Assignment document, calculate financial ratios and evaluate their implications on organizational decision making.
Week 7 Assignment: Financial AnalysisTo make informed decisions and achieve strategic goals, health care leaders mustcarefully analyze an organization’s financial position. A ratio analysis, for example, mayimpact decisions for strategic initiatives such as expansions, consolidations, mergers, oracquisitions. For this Assignment, you calculate ratios and consider their implications fororganizations.Scenario 1: ABC HospitalABC Hospital is a rural facility in Medford, Oregon that competes with two otherhospitals in delivering quality patient care in the Rogue Valley. One of the competinghospitals provides cancer treatment services similar to ABC Hospital and has beengaining a larger market share in the last 12 months because of its television andbillboard ads.Recently, the local news station covered a story about a report published by anindependent research company stating that in the last five years, the Rogue Valley hasexperienced a steady increase of residents with pancreatic and testicular cancer. Inresponse to this report and because of the shrinking market share, the chief executiveofficer (CEO) of the hospital has tasked the chief strategy officer (CSO) and the chieffinancial officer (CFO) with exploring whether it should make additional investments incancer treatment services that will allow the organization to increase its capacity toserve more patients and gain a larger sector of the market.Based on their analysis, the CSO and CFO have presented you with the following twooptions to review prior to the meeting with the CEO:Option 1:ABC Hospital invests $11,995,000 in the development of a new state-of-the-art cancer treatment center. Based on their estimates, the first year cashflow will be $2,000,000, the second year cash flow will be $4,000,000, the thirdyear cash flow will be $5,000,000, and the fourth year cash flow will be$8,000,000. The expected return of 8.9% is used as the discount rate.Option 2:ABC Hospital invests $5,095,000 in a joint venture with a reputableoncology group and the hospital agrees to a 55% interest in the joint venture.Based on the estimates, the first year cash flow will be $1,500,000, the secondyear cash flow will be $3,000,000, the third year cash flow will be $4,500,000,and the fourth year cash flow will be $6,500,000. The expected return of 8.9% isused as the discount rate.The AssignmentExplain which of the two options you would recommend to the CEO. You may onlyselect one option. Support your position and show your calculations. It is essential thatyou use at least two different financial ratio calculations.© 2016 Laureate Education, Inc.Page1of4
Scenario 2: Serenity Health CareSerenity Health Care is a large integrated health care system located in the Midwest. Ithas a 100-year tradition of providing quality patient care to its customers regardless oftheir ability to pay for services. Recently, the chair of the board of directors and the chiefexecutive officer (CEO) of Hall Healthcare System, a competitive organization,approached Serenity’s CEO about a partnership because of its inability to continue tocompete with Serenity and its declining financial performance.Because Serenity is three times larger than Hall, the CEO would like to present to hisboard of directors a proposal in which Serenity acquires Hall Healthcare System. Hereis the information that he plans to present to the board:20152014Current assetsCash and cash equivalents$2,275,884$7,900,318Short-term investments$3,945,998$1,287,932Receivables, less doubtfulaccounts$4,958,923$4,000,891Other current assets (inventory)$2,667,391$5,590,076Total current assets$13,848,196$18,779,217Limited-use assets$2,397,421$4,932,097Property and equipment$4,510,961$3,982,018Other long-term assets$2,301,810$2,367,809Total assets$23,058,388$30,061,141Liabilities and net assetsCurrent liabilitiesCurrent portion of long-term debt$850,000$1,562,091Accounts payable$3,120,692$5,990,128Estimated third-party settlements$962,908$1,409,610Accrued salaries, wages, andfees$5,837,624$7,903,871Other accrued liabilities$2,163,187$2,843,098Total current liabilities$12,934,411$19,708,798Long-term debt, net$2,450,873$3,906,781Other noncurrent liabilities$938,578$1,456,053Total liabilities$16,323,862$25,071,632Net assetsUnrestricted$400,000$3,712,900Temporarily restricted$600,000$900,000Permanently restricted$5,734,526$376,609Total net assets$6,734,526$4,989,509Total liabilities and net assets$23,058,388$30,061,141The Assignment© 2016 Laureate Education, Inc.Page2of4
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