Using the financial statements from the Major Medical Center Case Study at the end of chapter 14, analyze the following: ? Review the auditor?s opinion letter and analyze any concerns. ? Review the financial statements. Analyze any unusual items and examine the balance sheet, operating statement, and cash flow statement. ? Review the notes and analyze any causes for concern. ? Calculate the following ratios using Excel: 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, ROA, and RONA. ? Evaluate Major Medical Center?s financial status.sheet, operating statement, and cash flow statement? Submit three- to four-page Word document (not including the title and reference pages) and your Excel worksheet. Your paper should be formatted according to APA style Board of TrusteesMajor 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 statements of operations, changes in net assets, and cash flows for the years then ended. These financial statements are the responsibility of the Medical Center?s 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 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 Major Medical Center Statements of Financial Position 31-Dec 2012 2011 (In Thousands) Assets Current Assets Cash and cash equivalents $8,065 $9,005 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 Increase in unrestricted net assets $ 2,568 $ 897 Major Medical Center Statements of Changes in Net Assets Net Assets Unrestricted Temporarily Restricted Permanently Restricted (In Thousands) Net Assets at December 31, 2010 $37,117 $3,023 $1,132 Increase in unrestricted net assets 897 ? ? Restricted contributions, grants, and other receipts ? 7,253 ? Investment income restricted for specific purposes ? 252 ? Net assets released from restrictions for: Operating expenses ? -2,863 ? Capital asset acquisitions ? (146) ? Change in net assets 897 4,496 ? Net Assets at December 31, 2011 38,014 7,519 1,132 Increase in unrestricted net assets 2,568 ? ? Restricted contributions, grants, and other receipts ? 5,421 ? Investment income restricted for specific purposes ? 169 ? Net assets released from restrictions for: Operating expenses ? -4,708 ? Capital asset acquisitions ? (139) ? Change in net assets 2,568 743 ? Net Assets on December 31, 2012 $40,582 $ 8,262 $1,132 ajor Medical Center Statements of Cash Flows Year Ended December 31 2012 2011 (In Thousands) Operating Activities Operating income $2,429 $751 Change in temporarily restricted net assets 743 4,496 3,172 5,247 Adjustments to reconcile change in net assets to cash provided by operations: Depreciation and amortization 22,541 18,856 Investment income earned on assets limited as to use -774 -698 Changes in operating assets and liabilities: (Increase) decrease in receivables for patient care -2,105 7,589 (Increase) decrease in due from third-party reimbursement programs -8,413 4,500 Increase in accounts payable and accrued expenses and accrued salaries and related liabilities 9,654 1,412 Net effect of increases and decreases in other assets and liabilities 2,286 (8,707) Cash provided by operations 26,361 28,199 Investing Activities Acquisitions of property, plant, and equipment, net -10,043 -12,998 Less amounts provided by restricted funds 139 146 Increase in investments (618) (70) Cash used in investing activities (10,522) (12,922) Financing Activities Net payment from (to) affiliates 126 -1,773 Increase in deferred financing costs -1,323 Repayments of long-term debt -13,326 -9,510 Deposits into sinking fund, as required by mortgage loan agreement -303 Increase in compensating balances for standby letters of credit -1,923 (Increase) decrease in pledges receivable (30) (3,190) Cash used in financing activities -16,779 -14,473 Net (decrease) increase in cash and cash equivalents -940 804 Cash and cash equivalents at beginning of year 9,005 8,201 Cash and cash equivalents at end of year $ 8,065 $ 9,005 See accompanying notes.
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