Difference between net income and cash flow

Question

Answer the following:

Question 1. Do not-for-profit health care organizations earn a profit (assuming that they are financially successful)? If so:

a. How do they show it on the income statement?

b. What do they do with any such profit?

Question 2. What is the difference between net income and cash flow?

Question 3. Using the following financial statement information for four not-for-profit clinics, fill in the missing values labeled a through h:

December 31, 1997: Clinic A Clinic B Clinic C Clinic D
Assets $ 80,000 $100,000 a $150,000
Liabilities $50,000 b $ 75,000 c
Equity d $ 60,000 $ 45,000 $ 90,000
December 31, 1998:
Assets e $130,000 $180,000 f
Liabilities $ 55,000 $ 62,000 g $ 80,000
Equity $ 45,000 h $110,000 $145,000

Question 4. Explain why financial ratios are more meaningful for financial analysis than individual entries.

Question 5. What is meant by the term "liquidity" as applied to an organization's financial health, and what are two ways it is measured?

Question 6. Do the following categories of ratios get their information from the balance sheet, the income statement, or both?

a. Liquidity Ratios b. Profitability Ratios c. Turnover Ratios d. Capitalization Ratios

Question 7. Using the financial statements of St. Ann's Hospital of the Neumann text, compute the following ratios:

						ST. Ann's Hospital
					Consolidated Financial Reports
Assets		1992	1991		Revenues	1992	1992
Current Assets		$2,685,773	$2,510,773
Fixed assets		3,871,521	3,899,044
		53,095	58,939		Net patient Service revenue	$10,045,961	$8,842,617
Total Assets		$6,610,349	$6,468,756		Other Operating
					revenue	170,608	138,763
					Total Operating revenue	$10,216,569	$8,981,380
Liabilities and Net Assets					Expenses
Current Liabilities		$810,171	$842,937		Nursing Services	$3,816,836	$3,248,137
Long -term liabilities		1,623,318	1,728,341		Other professional	1,651,426	1,470,261
Total liabilities		$2,433,489	$2,571,278		General Services	1,559,889	1,415,699
					Fiscal services	387,518	321,333
					Administrative services	1,790,919	1,678,675
					Provision for bad debts	813,058	458,852
					Total expenses	$10,019,646	$8,592,957
					Operating income	$196,923	$388,423
Net assets		$4,176,860	$3,897,478		Contributions	82,460	15,745
Total Liabilities
and net assets		$6,610,349	$6,468,756		Increase in unrestricted
					net assets	$279,383	$404,168

a. Current Ratio
b. Operating Margin
c. Return on Assets
d. Long-Term Debt Ratio

What do the results tell you about the financial health of the hospital?