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The Board chair has asked management to develop some strategies to improve profitability and

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4. The Board chair has asked management to develop some strategies to improve profitability and;estimate the impact of the strategies on the hospital?s ROE. By how much would the 2013 ROE change;from each of these strategies?;a. Vacant land is sold and total assets decreases by $2.0 million. Net income would not be affected;and the Board wants to maintain the 2009 debt ratio.;b. Debt is substituted for equity and the debt ratio increases to 48 percent. Total assets would not be;affected. Interest expense would increase but better cost controls would offset the higher interest;expense and thus net income would not change.;c. LEAN management is implemented and total expenses decrease by $0.5 million. Total revenue;total assets, and total liabilities & net assets would not change.;d. Whatever strategy Melissa chooses, she is under pressure from the Board to increase return on;equity to at least 10 percent. What total margin would be needed to achieve the 10% ROE, holding;everything else constant?;5. What additional financial information would be useful in the analysis?

 

Paper#29743 | Written in 18-Jul-2015

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