The 2015 Comparative Balance Sheet And Income Statement Of R

The 2015 Comparative Balance Sheet And Income Statement Of Rolling Hil

The 2015 comparative balance sheet and income statement of Rolling Hills, Inc., follow: Additionally, Rolling Hills purchased land of $23,600 by financing it 100% with long-term notes payable during 2015. During the year, there were no sales of land or equipment, no additional issuances of notes payable, no retirements of stock, and no treasury stock transactions. Requirements 1. Prepare the 2015 statement of cash flows, formatting operating activities by the indirect method. 2. How will what you learned in this problem help you evaluate an investment? Question 1. 1. (TCO 4) Which of the following is part of a statistics budget? (Points : 5) Output expectations Responsibility for estimation Estimation methodology All of the above Question 2. 2. (TCO 4) Which budgetary issue causes the most strife in all areas of a health care organization? (Points : 5) Setting volume levels Setting prices Allocation of indirect costs Deciding whether to use a fixed or flexible budget Question 3. 3. (TCO 4) Effectiveness is a relationship between: (Points : 5) Outputs and organizational goals Inputs and outputs Inputs and organizational goals None of the above. Question 4. 4. (TCO 3) Estimate the total variable cost (i.e., including both routine and ancillary) per MSDRG 505 using the departmental cost/charge ratios and variable cost percentages. (Your answer might be slightly different due to rounding. Pick the closest.) (Points : 5) $5,213 $3,892 $7,613 $5,452 $8,070 Question 5. 5. (TCO 3) Your controller has told you that the marginal profit of DRG 209 (major joint procedure) for a Medicare patient exceeds the marginal profit for an average charge patient. Why might this occur? (Points : 5) High fixed costs of treatment Low Medicare payment High prices Low prices Question 6.6. (TCO 2) A statement that reports the financial position (assets, liabilities, and stockholders' equity) of an accounting entity at a point in time is called a(an): (Points : 5) Income statement Statement of retained earnings Balance sheet Statement of cash flows Report of management Question 7. 7. (TCO 2) Which of the following is the BEST example of a financial metric? (Points : 5) Degree of innovation Employee empowerment Accreditation by the Joint Commission on Accreditation of Healthcare Organizations Total margin Length of stay 1. (TCO 4) Based on the below information, what dollar effect did the increased admission rate have on cost? You have been asked by management to explain the variances in costs under your inpatient capitated contract. The following data is provided. Use the following data to calculate the variances. Budget Actual Inpatient Costs $12,568,500 $16,618,350 Members 42,000 Admission Rate 0.095 Case Mix Index 0.85 Cost per Case (CMI = 1.0) $4,750 $4,900 (Points : 10) Question 2. 2. (TCO 4) Based on the information below, what rate must be set to generate the required $80,000 in profit in the preceding example? You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budgetary data is presented below: Budgeted Procedures $10,000 Budgeted Cost $400,000 Desired Profit $80,000 It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38.00 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below: Payer Volume% Discount% Blue Cross Unity PPO Kaiser Self Pay % (Points : 10) Question 3. 3. (TCO 4) What is the amount of variance that is attributed to the change in labor productivity? Use the following data to calculate the variances. The following information has been prepared for a home health agency. Budget Actual Wage Rate per Hour $16.00 $17.00 Fixed Hours Variable Hours per Relative Value Unit (RVU) 1.1 Relative Value Units (RVUs) 1,200 Total Labor Hours 1,640 Labor Costs $21,120 $27,880 Cost per RVU $21.12 $23.23 Budgeted costs at actual volume would be $25,344 ($21.12 × 1,200), and the total variance to be explained is $2,536 Unfavorable ($27,880 - $25,344). Be sure to specify whether the variance is favorable or unfavorable. (Points : 5) Question 4. 4. (TCO 2) How are revenues and expenses defined under accrual accounting? (Points : 5) Question 5. 5. (TCO 2) What are the double-entry accounting system and the duality concept? How are they related? (Points : 5) Question 6. 6. (TCO 1) What are social responsibility and ethics as they relate to business-oriented organizations? How should social responsibility and ethics affect the decisions of even for-profit companies? (Points : 20) Question 7. 7. (TCO 2) Define and describe the purpose of fund accounting (now called net assets). (Points : 10)

Paper For Above instruction

Introduction

The analysis of a company's financial statements and cash flow is integral to understanding its financial health and operational efficiency. The 2015 financial statements of Rolling Hills, Inc. offer a comprehensive view of its assets, liabilities, income, and cash movements during the year. Additionally, preparing a statement of cash flows using the indirect method provides insights into how operational, investing, and financing activities impact cash balances, which is essential for evaluating investment potential.

Analysis of the 2015 Financial Statements

Rolling Hills' 2015 balance sheet and income statement reveal key financial positions. The balance sheet articulates the company's assets, liabilities, and equity at year-end, highlighting liquidity and capital structure. The income statement summarizes revenue, expenses, and net income, reflecting operational performance. Analyzing these documents helps identify the company's profitability, solvency, and efficiency ratios, which are critical metrics for prospective investors.

Preparation of the Cash Flow Statement

The cash flow statement, prepared via the indirect method for 2015, begins with net income, adjusts for non-cash transactions, and considers changes in working capital. Given that Rolling Hills purchased land financed entirely through long-term notes payable and made no other land or equipment transactions, the investing activities section will reflect the land purchase as an outflow. The financing section will include the land purchase as a financing activity, highlighting the use of debt. Operating activities will be adjusted to account for depreciation, gains/losses, and working capital changes based on the income statement and balance sheet data.

This process illustrates how non-cash items and balance sheet variations influence cash flows from operating activities, a crucial insight for assessing liquidity and operational efficiency. Understanding the cash flow statement enhances the ability to evaluate whether a company generates sufficient cash from operations to meet its obligations and fund growth, informing investment decisions.

Implications for Investment Evaluation

The knowledge gained from analyzing financial statements and preparing cash flow statements is instrumental in making informed investment decisions. It allows investors to assess cash generation capacity, debt management, profitability stability, and operational efficiency. For instance, if a company shows strong net income but poor cash flow, it might face liquidity issues, indicating higher investment risk. Conversely, consistent positive cash flows from operating activities suggest sound financial health, increasing the attractiveness of investment.

Moreover, understanding changes in working capital, capital expenditures, and financing activities provides insights into future growth potential and financial resilience. Thus, mastering the preparation and analysis of these financial documents is vital for evaluating the viability and stability of investment opportunities.

Understanding the Role of Budgeting and Variances

Additional questions from the scenario emphasize the importance of budgets in managerial decision-making. Knowing which elements constitute a statistics budget, recognizing the key budgetary issues in healthcare organizations, and understanding the relationships between efficiency, effectiveness, and organizational goals are central to effective financial management.

Analyzing budget variances, such as the impact of increased admission rates on costs or labor productivity changes, further aids in operational control and strategic planning. Recognizing unfavorable variances allows managers to identify areas needing correction, thereby improving overall financial performance.

Conclusion

In summary, comprehensive analysis of financial statements, cash flow statements, and budgets provides critical insights into a company's financial health. For investors, such knowledge is invaluable in making informed decisions, assessing risks, and identifying growth opportunities. The case of Rolling Hills, Inc. exemplifies how detailed financial analysis supports sound investment choices and strategic planning, ultimately contributing to a company's long-term success.

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