Financial and Strategic Planning1 - Coursework Example

Financial and Strategic Planning1 al Affiliation:   Trinity Hospital Balance Sheet as of Dec. 31, Trinity Hospital BalanceSheet as of Dec. 31, 2011Assets     Current Assets        Cash in Bank 2,360,0001,445,000      Revenue1,500,0001,300,000      Delayed Payments0500,000      Grants0250,000   Total Current Assets 3,860,0003,495,000   Fixed Assets        Equipment and Fixtures1,000,0001,000,000      (less Depreciation)100,000105,000   Total Fixed Assets1,100,000 1,105,000Total Assets4,960,0004,600,000   Liabilities     Current Liabilities       Operating Expenses1,000,0001,200,000      Debt Retirement150,000150,000      Retirement Plan150,000150,000      Malpractice Costs150,000150,000   Total Current Liabilities1,450,0001,650,000   Long-Term Liabilities        Long-Term Debt900,000750,000Total Liabilities2,350,0002,400,000   Net Worth (Total Equity)2,410,0002,000,000Total Liability and Net Worth4,760,0004,400,000Current RatioThe current ratio measures the ability of a company to pay off its current liabilities using purely its current assets.

Businesses aim to have a high current ratio as it shows their ability to settle current liabilities in case they are demanded by their debtors. It ensure liquidity for the debtor, guaranteeing them full payment.The company’s current ratio is generally good, above 1. A current ratio of more than 2 means the company has the ability to pay off twice the value of its current liabilities should they become due at any given point within the given financial year. The current liabilities in 2011 decreased significantly by 0.54. This means that the institution’s ability to convert its services into cash has reduced in 2011.

Working CapitalThe working capital is a ratio that indicates whether a given company is in a position to cover its short term debt by purely using its short term assets. This is obtained by obtaining the difference between the Current Assets and Current Liabilities.The institution’s working capital is significantly positive. However, the working capital reduced from 2010 to 2011. This means that even though the company is able to pay off its debtors in the short-term, they are more prone to bankruptcy in 2011 than in 2010.

Debt/Equity Ratio or LeverageThe debt/equity ratio is a measure of a given firm’s leverage. It essentially gives the amount of the processes and procedures that are financed by liability and that financed by the shareholder’s equity. It shows a company’s financial position relative to debtors and shareholders.The institution’s leverage indicates that in 2011 the institution adopted a more aggressive debt financing technique for its growth. This may potentially lead to the institution realizing volatile earnings owing to the increase in interest as a result of an increase in debt.

This is evident in the fact that even though the institution has adopted a more aggressive debt financing approach, revenue reduced from $1,500,000 in 2010 to $1,300,000 in 2011. This raises concern as debt is increasing while revenue is reducing, bringing down the financial position of the institution relative to its debt. This also considerably reduces the institution’s credit rating, lowering the institution’s ability to seek debt financing in the future.ReferencesLee, A. C., Lee, J. C.

, & Lee, C. F. (2009). Financial analysis, planning & forecasting : theory and application. Hackensack: World Scientific.Nugus, S. (2009). Financial planning using Excel : forecasting planning and budgeting techniques. Amsterdam: CIMA.Palepu, K. G., Healy, P. M., & Bernard, V. L. (1999). Step-by-step business analysis and valuation : using financial statements to value any business. Cincinnati: South-Western.Siegel, J. G. (1991). How to analyze businesses, financial statements, and the quality of earnings.

Englewood Cliffs: Prentice Hall.United States Securities and Exchange Commission. (2007). Beginners guide to financial statements. Washington: U.S. Securities and Exchange Commission.