Case Study 1

2141 Words Feb 16th, 2015 9 Pages
Pros:
1) Days cash on hand was 66.87 in 2012 and it dropped in 2013. This is better because they are potentially paying off debt and there is no need to just keep money sitting.
2) Liquidity is better and this means they are being proactive and managing their money.
3) Outpatient visits are going up each year they are still bringing in revenue.
4) ROE is lower than the quartile, but is still within the median.
5) Use of long-term debt has increased meaning they are paying that off a little at a time.
Cons:
1) Total Margin was 8.75% in 2011 which is higher than the +Quartile at 5.5%. This could put them in debt is a competitor comes along because they could come in with lower rates putting them out od business.
2) Profit per
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Our total margin, however, while decreasing, is still nearly twice that of the industry’s average. This could point to a low-cost operating model, but given low patient pricing and high outpatient costs, this is not the case. More likely, we have an inflated total margin due to taking on a high amount of debt, which also correlates with our other notable financial ratios.
Question 3
3. Sound financial analysis involves more than just calculating numbers. The American Association of Individual Investors suggests that investors consider the qualitative factors below when evaluating a company. Answer the questions for River Community Hospital. When there is insufficient information in the case to answer a question, briefly speculate about why the question might be relevant to the hospital.
Are the company’s revenues tied to one key customer? The company’s revenues are largely tied to one key group of customers – insurance companies. Almost all of a hospital’s income comes from insurance companies with the largest payers being Medicare and Medicaid. Should a hospital lose one of these primary payers, they would lose a large portion of their income putting the hospital in a critical position as a company.
To what extent are the company’s revenues tied to one key product? To a large extent the company’s revenues are tied to many products including services, operations and treatments.

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