MAJOR MEDICAL CENTER CASE STUDY MAJOR MEDICAL CENTER1 For the Major Medical Center financial statements on the following pages, complete the following: a. Read the auditor’s opinion letter. Are any flags raised? b. Review the financial statements. Search for unusual items. What things catch your eye on the balance sheet, operating statement, and cash flow statement? c. Review the notes. Do any of them raise cause for concern? d. Calculate the following ratios: common size, current, quick, days of cash on hand, receivables turnover, average collection period, fixed asset turnover, total asset turnover, debt, debt to equity, times-interest-earned, operating margin, total margin, ROA, and RONA. e. What do you think of Major Medical Center’s financial status?
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Major Medical Center is a fictional organization. Any similarity to real organizations is purely coincidental.
I.N. SINCER AND OLD, CPAs 2650 East 38th Street New York, New York 10089 Report of Independent Auditors Board of Trustees Major Medical Center We have audited the accompanying statements of financial position of Major Medical Center (the ―Medical Center‖) as of December 31, 2024 and 2023, and the related statements of operations, changes in net assets, and cash flows for the years then ended. These financial statements are the responsibility of the Medical Center’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Major Medical Center at December 31, 2024 and 2023, and the results of its operations, changes in net assets, and cash flows for the years then ended, in conformity with generally accepted accounting principles. April 30, 2024 I.N. SINCER AND OLD, CPAS
Major Medical Center Statements of Financial Position December 31 2024 2023 (In Thousands) Assets Current Assets Cash and cash equivalents Assets limited as to use—compensating balance for letters of credit Short-term investments Receivables for patient care, net of allowance for doubtful accounts (2021—$27,232; 2020—$31,934) Pledges receivable Inventories, at average cost Due from third-party reimbursement programs Receivables for government grants Other Total Current Assets Assets Limited as to Use Sinking fund Compensating balance for standby letters of credit Long-term investments Due from affiliates, net Pledges receivable, net of allowance for uncollectible pledges (2021—$2,218; 2020—$4,453) Property, plant, and equipment net Deferred financing costs Other Liabilities and Net Assets Current Liabilities Current portion of long-term debt Accounts payable and accrued expenses Accrued salaries and related liabilities Due to third-party reimbursement programs, net Advances on government grants Total Current Liabilities Long-term debt, less current portion Accrued post-retirement benefits Other noncurrent liabilities Total Liabilities
$ 8,065
$9,005
1,000 1,387
— 1,283
49,719 1,814 1,690 6,539 — 2,234 $ 72,448
47,614 2,205 2,326 — 467 3,415 $66,315
14,487 923 1,132 3,417
13,410 — 618 3,543
1,889 98,555 1,323 2,065 $196,239
1,468 89,777 — 1,043 $176,174
$ 11,608 29,489 25,572 — 1,587 $ 68,256 55,539 6,023 16,445 $146,263
$11,488 25,311 20,096 1,874 — $58,769 47,709 6,017 17,014 $129,509
Net Assets Without donor restrictions With donor restrictions Total Net Assets Total Liabilities and Net Assets See accompanying notes.
$ 40,582 9,394 $ 49,976 $196,239
$ 38,014 8,651 $ 46,665 $ 176,174
Major Medical Center Statements of Operations Year ended December 31 2024 2023 (In Thousands) Operating Revenue Net patient service revenue Other revenue Net assets released from restrictions Total Operating Revenue Operating Expenses Salaries and wages Employee benefits Supplies and expenses Depreciation and amortization Research Interest Total Operating Expenses Operating Income Net assets released from restrictions used for capital acquisitions Increase in net assets without donor restrictions
$402,921 13,356 4,708 $420,985
$369,512 13,850 2,863 $386,225
$207,141 44,456 137,505 22,541 2,457 4,456 $418,556 $ 2,429 139 $ 2,568
$196,453 44,860 117,838 18,856 2,214 5,253 $385,474 $ 751 146 $ 897
See accompanying notes.
Major Medical Center Statements of Changes in Net Assets Net Assets Without Donor With Donor Restrictions Restrictions Net Assets at December 31, 2022 Increase in net assets without donor restrictions Restricted contributions, grants, and other receipts Investment income restricted for specific purposes Net assets released from restrictions for: Operating expenses Capital asset acquisitions Change in net assets Net Assets at December 31, 2023
$37,117 $ 897 —
$4,155 $— 7,253
—
252
— — $ 897 $38,014
(2,863) (146) $4,496 $8,651
Increase in net assets without donor restrictions
$ 2,568
$—
—
5,421
Restricted contributions, grants, and other receipts