Scenario Questions Information Given Read The Scenario Below

Question

Scenario Questionsinformation Givenread The Scenario Below And Answ Read the scenario below and answer the following 3 questions. You will also need to complete the Budget on the "Income Statement & Budget" tab. Scenario: South Shore Medical Clinic is expanding its operations. As you will notice from Year 3 to Year 4, they have increased their revenue and encountered additional expenses. In addition, they have rented a new office at the end of the year so their rent expense is going to increase (they will now have two offices). In addition, they have added 2 additional staff members to payroll. Using the Income Statement, prepare a budget that takes these changes into account for the upcoming year. Questions: Using the Balance Sheet, calculate the current ratio. Comment on whether or not the ratio shows financial strength. Using the Income Statement, calculate the operating margin ratio for Year 4. How well does the company measure in terms of operating efficiency? Explain your budget suggestions. Do you think Revenue will increase or decrease? Do you think Expenses will increase or decrease? Income Statement & Budget Task #1: South Shore Medical Clinic is expanding its operations. As you will notice from Year 3 to Year 4, they have increased their revenue and encountered additional expenses. In addition, they have rented a new office at the end of the year so their rent expense is going to increase (they will now have two offices). In addition, they have added 2 additional staff members to payroll. Using the Income Statement below, prepare a budget that takes these changes into account for the upcoming year. Suggest the budget amounts for Year 5 in the column below. South Shore Medical Clinic Income Statement For the year ending December 31, 20X4 ACTUALBUDGET Revenues: Service Fee Revenue$160,000 Total Revenues Expenses: Advertising Expense$20,000 Shipping Expense$12,000 Salaries Expense$80,000 Rent Expense$32,000 Utilities Expense$5,200 Total Expenses Inco

Dr. Jack HW Helper · Accepted Answer

Introduction The expansion of South Shore Medical Clinic presents a strategic opportunity to analyze the financial health of the organization and prepare a comprehensive budget reflecting upcoming changes. This paper evaluates the current financial position through ratio analysis, assesses operational efficiency, and offers strategic budget recommendations to align with growth objectives. Additionally, it provides insights into cultural and operational considerations essential for sustainable growth. Financial Analysis 1. Current Ratio and Financial Strength The current ratio is a critical indicator of a company's short-term liquidity and ability to meet its current obligations. It is calculated as current assets divided by current liabilities. Based on the balance sheet data, current assets total $145,000, and current liabilities amount to $97,200. Therefore, the current ratio is approximately 1.49 ($145,000 / $97,200). A current ratio above 1 indicates sufficient liquidity, suggesting that South Shore Medical Clinic maintains a sound financial position to cover its immediate obligations. However, a ratio too high may imply excess liquidity that could be better utilized for growth initiatives, whereas a ratio below 1 would raise concerns about liquidity. Consequently, the current ratio here demonstrates moderate financial strength, with room for efficient asset management. 2. Operating Margin and Efficiency The operating margin ratio reflects how effectively the company controls its operating costs relative to revenue. It is computed as operating income divided by total revenue. Operating income equals total revenue minus total expenses. From the income statement, total revenues are $160,000, and total expenses sum to $157,200 (add all expense items: $20,000 + $12,000 + $80,000 + $32,000 + $5,200). Thus, operating income is $2,800 ($160,000 - $157,200). The operating margin is approximately 1.75% ($2,800 / $160,000). This low margin indicates limited operating effi

Debit	Credit
Cash: $30,000
Accounts Receivable: $60,000
Supplies: $10,000
Inventory: $45,000
Equipment: $193,000
Building: $200,000
	Accounts Payable: $32,200
	Current Portion - Long Term Debt: $65,000
	Long Term Debt: $210,000
	Owner's Equity: $220,000
Service Fee Revenue: $160,000
Advertising Expense: $20,000
Shipping Expense: $12,000
Salaries Expense: $80,000
Rent Expense: $32,000
Utilities Expense: $5,200
Total: $687,200	Total: $687,200

Scenario Questions Information Given Read The Scenario Below

Scenario Questionsinformation Givenread The Scenario Below And Answ

Assets

Liabilities & Net Worth

Trial Balance December 31, 20X4

Paper For Above instruction

Introduction

Financial Analysis

1. Current Ratio and Financial Strength

2. Operating Margin and Efficiency

3. Budget Recommendations and Future Outlook

Conclusion

References

ACTUAL	BUDGET
Revenues:
Service Fee Revenue	$160,000
Total Revenues
Expenses:
Advertising Expense	$20,000
Shipping Expense	$12,000
Salaries Expense	$80,000
Rent Expense	$32,000
Utilities Expense	$5,200
Total Expenses
Income:
Net Income	$10,800
Operating Margin