# Basic Financial Calculations

Assignment: Application: Basic Financial Calculations

Before you learned algebra, you first had to learn basic addition, subtraction, multiplication, and division. Similarly, before you can fully understand the finances of a health care organization, you first need to be able to apply basic financial calculations used in almost all domains of accounting. A firm grasp of these accounting concepts will better enable you to confidently make budgetary and resource decisions. In this Assignment, you complete calculations that will familiarize you with some of the necessary basic accounting concepts.

Based on the information and financial statements below, calculate the following financial ratios in an Excel Spreadsheet:

= Total Current Assets / Total Current Liabilities

= Cash / (Total Operating Expense / 365 days)

= Accounts Receivable / (Net Patient Service Revenue / 365)

= Accumulated Depreciation / Depreciation Expense

= [Long Term] Debt / Net Assets

= [Long Term] Debt / Total Assets

= Net Patient Service Revenue / Gross Patient Service Revenue

= Gain or (Loss) from Operations / Net Patient Service Revenue

A title and reference page are NOT needed in this assignment. Put your name and assignment at the top of the Excel spreadsheet.

For those not comfortable with the use of Microsoft Excel, this week’s Optional Resources suggest several tutorials.

To prepare:

Baker, J. J., Baker, R. W., & Dworkin, N. R.  (2018). Health care finance: Basic  tools for nonfinancial managers (5th ed.). Burlington, MA: Jones and  Bartlett Learning.
Chapter 4, “Assets, Liabilities, and Net Worth” (pp. 33-36)
In this chapter, you are introduced to the meaning of assets, liabilities, and net worth. You explore the relationship between the three and how they must be balanced if an organization is to be successful.
Chapter 6, “Expenses (Outflows)” (pp. 47-54)
The focus of this chapter is expenses and how they differ from costs. It highlights how costs should be reported and how expenses can be grouped for more effective planning and control.
Chapter 9, “Understanding Inventory and Depreciation Concepts” (pp. 81-93)
This chapter examines the relationship between inventory and the cost of goods. It demonstrates how to calculate inventory turnover and product depreciation.
Chapter 11, “Reporting as a Tool” (pp. 119-125)
This chapter describes the basic financial reports and how they are used in financial decision making. The four key financial statements are the balance sheet, the statement of revenue, and expense, the statement of fund balance or net worth, and the statement of cash flows.

Zelman, W., McCue, M., & Glick, N. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications (3rd ed.). Hoboken, NJ: Jossey-Bass.