Texas Children Hospital and Affiliated Entries Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Texas Children Hospital and Affiliated Entries Case Study Solution

Question 1

All the ratio computations for this question are shown in exhibit 1 in the appendices.

a).

The current ratio shows an increasing trend for the company from 2008 to 2009. The ratio is however, unfavorable compared to the median value of 1.88.

b).

The days in accounts receivables ratio shows a decreasing trend for the company from 2008 to 2009, which is favorable. The ratio is also favorable compared to the median value of 50. The company is collecting its receivables early.

c).

The day’s cash on hand ratio shows an increasing trend for the company from 2008 to 2009, which is favorable. The ratio is however, unfavorable compared to the median value of 103.

d).

The above three ratios shows that the liquidity position of the company is not as strong as that of the industry but it has improved significantly in 2009.

e).

Only the common equity securities of the domestic companies can be sold quickly to generate cash to pay the bills. The value of this is not mentioned in the footnote. Moreover, it does not change our answer to the above question and we would still say that the liquidity position of the company is improving.

Question 2

All the ratio computations for this question are shown in exhibit 2 in the appendices.

a).

The long-term debt to assets ratio has increased from 0.21 to 0.40 in 2009 and this is unfavorable. The median ratio is also lower than the 2009 ratio of the company, which is again unfavorable for the company.

b).

The net assets to total assets ratio have decreased for the company, which is unfavorable, however, it is much higher than the industry median of 0.54, which is favorable for the company.

c).

The debt service coverage ratio has been computed only for 2009, whichare 9.75. This is significantly high than the industry median ratio of 3.18. This is highly favorable and shows that the company would always be able to pay its debt on time.

Texas Children Hospital and Affiliated Entries Harvard Case Solution & Analysis

d).

The above ratios tells us that the level of debt and the assets that are financed through debt has resulted in an increasing proportion of debt in the capital structure however, the company has enough cash to repay the debt and it has good coverage ratios as compared to the industry.

e).

According to the 2008 balance sheet, the Hospital was obligated to pay $ 536 million of debt in 2009. However, according to the statement of cash flows the actual principle payment in 2009 had been $ 7.6 million. These two numbers are different and there can be many reasons such as the maturity of the debt is much longer or the company might have renegotiated different terms with the issuer of debt for repayment of the debt.

Question 3

All the ratio computations for this question are shown in exhibit 3 in the appendices.................

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