Patton-Fuller Ratio Computation

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Patton-Fuller Ratio Computation

July 8, 2013

HCS/405

Regina Robinson

The Eight Basic Ratios

1. Current Ratio (Unaudited)

2009 Current Assets $128,867 ÷ Current Liabilities $23,807= 5.4129877 or 5.413 (5 to 1)

2008 Current Assets $130,026 ÷ Current Liabilities $8,380 = 15.516229 or 15.516 (15 to 1)

Current Ratio (Audited)

2009 $128,867 ÷ $23,807= 5.3709833 or 5.371(5 to 1)

2008 $130,026 ÷ $8,380= 15.516229 or 15.516 (15 to 1)

Disagree:

This ratio is consistently a measure of short-term debt paying ability (Baker & Baker, 2011). However, it must be carefully interpreted (Baker & Baker, 2011). Observationally, the CEO’s report to the board that all financial ratios have improved is inaccurate; in all actuality, the ratios have not. In effect, the numbers simply do not back up the declaration. The unaudited and audited current ratios show that in 2008 the hospital’s assets were greater than those in 2009 were. This ratio also shows the current assets in 2008 were much higher than the current liabilities for the same year, a ratio of 15 to 1. In 2009 the current assets to current liabilities ratio was only 5 to 1. The hospital’s assets were lower in 2009 and yet the liabilities in 2009 were higher. The hospital’s assets were higher in 2008 and the liabilities in 2008 were lower. This shows the hospital was more profitable in 2008, not 2009.

2. Quick Ratio (Unaudited)

2009 Cash and Cash Equivalents $22,995 + Net Receivables $59,787= $82,782 ÷ Current Liabilities $23,807= 3.4772125 or 3.477 (3 to 1)

2008 Cash and Cash Equivalents $41,851 + Net Receivables $37,666= $79,517 ÷ Current Liabilities $8,380= 9.4889021 or 9.489 (9 to 1)

Quick Ratio (Audited)

2009 $22,995 + $58,787= $81,782 ÷ $23,807= 3.4352081 or…...

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