St. Mary Financial and Operating Indicator Analysis Report

¶ … liquidity, we will be using the current ratio and the quick ratio in order to evaluate the company's short-term solvability. The current ratio has gradually increased in the last years from 1.31 in 1990 to 1.68 in 1993. This comes to show that the community hospital has steadily improved its short-term solvability and that it is currently in no danger of not being able to cover its expenses.

In general, the current ratio needs to be higher than 1 and, as we can see from the current ratio values in 1990 to 1993, it has been constantly so, with a tendency for improvement. The quick ratio, another benchmark for liquidity, is more or less on the same parameters, increasing from 1.01 in 1990 to 1.56 in 1993. Obtained by dividing the total current assets value minus the inventory to the overall current liabilities value, the quick ratio gives us further information about the company's liquidity.

As I have said, corroborated with the previous current ratio results, the hospital's short-term solvability is no subject of worry. In terms of profitability, the hospital has improved its margins from strong negative values in 1990 (-36.1% for the operating margins and -30.24% for the gross margin) to solid positive values in 1993 (4.24% for the operating margins and 4.81% for the gross margins).

With the observation that the hospital is a non-profit organization and that, in this sense, the profitability indicators tend to be less important, we may note that the hospital has been performing better and better over the last four years, with a notable tendency of improvement over these couple of years. In terms of efficiency, most of the indicators used (total asset turnover, current asset turnover, average age of plant) follow the same trend.

Indeed, 1990, 1991 and 1992 marked three years of ascending trend for these indicators, while 1993 was equivalent to a sharp drop, most notable for the current asset turnover indicator, with 21.4%. Overall, these drops are not necessarily concerning, because the hospital's efficiency is still showing consistent figures. Further more, if we compare these figures with the national benchmark efficiency indicators, we will notice that the hospital ranks better than the average in all categories available, sometimes by three or four times higher.

The average collection period has significantly decreased from 1990 to 1993, from 73.5 in 1990 to 51.1 in 1993. The problem is that the hospital has been ranking below the benchmark average in all these years, with no signs of improvement whatsoever. Defined as the "average time period for.