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# Week 4 – Assignment 2

## Financial and Operating Ratios

### [WLOs: 1, 2, 3, 4] [CLOs: 1, 2, 3, 4, 5]

Prior to beginning work on this assignment, review Chapters 13, 14, 15, as well as the 16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses (Links to an external site.)Links to an external site. article and the Financial Ratios (Links to an external site.)Links to an external site. web page. You will also utilize Appendices 13A, 13B, 13C, and 33A as well as the Balance Sheet and Income Statement from Dr. Smith and Dr. Brown’s Financial Statements.

After reviewing the chapters, download the Financial and Operating Ratios Assignment template. You will be responsible for entering your responses directly into the template provided. You will need to ensure that your responses are thorough, examples are given where indicated, and references are listed in APA format in the space provided within the template. In the assignment template provided, complete Parts 1 through 5.

Part 1: Calculations of Financial Ratios

• Calculate the financial ratios for Dr. Smith and Brown’s physician practice to analyze the financial viability of the organization.
• Identify the type of ratio for each of the following:
• Current ratio
• Quick ratio
• Debt Service Coverage ratio (DSCR)
• Operating Margin
• Return on Total Assets (ROTA)

Part 2: Type of Ratios

• Define the type of ratios used in determining the financial viability of an organization.
• Liquidity
• Solvency
• Profitability

Part 3: Operating Ratios

• Define the financial ratios utilized to determine the financial status of Dr. Smith and Brown’s physician practice.
• Compare the results in Part 1 with the median to determine the value associated with the financial ratio.
• Analyze the results calculated in Part 1 and explain what the calculated result tells you about the financial health of Dr. Smith and Dr. Brown’s physician practice

Part 4Capital Budgeting Expenditures – Time Value of Money Calculations

• Calculate each of the operational ratios for Dr. Smith and Dr. Brown’s physician practice.
• Present Value
• Internal Rate of Return
• Pay Back Period

Part 5: Evaluation of Capital Expenditures

• Define the time value of money
• Provide a real-world example for the time value of money
• Explain why time is an important factor when considering a capital expenditure.
• After review of the Dr. Smith and Dr. Brown’s financial statements and ratios, analyze the feasibility that the Capital Expenditure listed above would benefit Dr. Smith and Dr. Brown’s practice. Explain your rationale on whether you would recommend the purchase of the capital expenditures identified. Include any positive or negative aspects of regulatory or government mandates that were considered in making the decision to purchase the capital expenditures.

Paper Requirements:
The Financial and Operating Ratios Template, once completed,

Slide 1 of 4

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