Gholam RezaMazyar NouraeeMuraliS.Surendran Chittiar

Company Background

•Initially setup was done in 1914•The new Manager: Dr. Noland Wright

1950s – Good business due to health care industry

Milestone

1960s – Public hospital image due to blacks admitted

1914 – Community general hospital serving Blacks

1940s – Increased census & gained accreditation

1970s – Suffer Losses & Bad Debts

1982 – Civil board that guides became inactive

1983 – $ 402,000 budget deficit & $ 749,000 in 1984

1990 – $ 20 million debt!!

1993 – Bankrupt!!!

1996 – Large Deficit!!!!!!!!!!!!

Question #1: Profitability

View on the Profitability, (nonprofit viability), solvency & Cash Flow?

The company has been running in lossesFor both 1994 and 1995

The ROA was also in the negative regionAs the losses before income tax increasedBy 81.24% in 1995

ROE = Equity multiplier*Asset turnover*Nett Income

The Increase in debts will increase the equity multiplier, however, the reductionIn Nett income caused the drop in ROE for 1995

Question #1: Profitability

View on the Profitability, (nonprofit viability), solvency & Cash Flow?

Question #1: Solvency

The solvency ratios shows a slight improvement in 1995 as compared to 1994

There was a reduction in cash in 1995 due mainly due to adjustments in theOperating activities.

Question #1: Profitability

View on the Profitability, (nonprofit viability), solvency & Cash Flow?

Question #1: Cash Flow

0

10

20

30

40

50

60

70

80

1994 1995

Day's sales in inventory

Days' sales in receviable

The cash flow on the individualYears shows a delay in theReceivables making it difficultFor the company to have liquidity

The cycle of 18.93 daysShows that the cycle is withinAn acceptable range and theCash was used and rolled well.

Question #1: Profitability

Quick Observation?........................

Question #1: Cash Flow

Profitability

Solvency

Cash Flow

The hospital is sunning at very bad lossesAs the company does not have liquidity to runThe company

The hospital has not seen a profit in yearsDue to the operating cost that exceeds the revenue

The profit margin and the ROA is in the negativeRegion suggesting losses

Question #2: Root causes

What are root causes of the current condition of the Hospital ?

• Desegregation impact on the patient ratio in the 60s

Non-financial aspects…………………

• Bad ratings from supplier demanding cash payments

• Employee layoff due to losses and bad debts

• Many hand change of management

• Tightening of admission criteria for patients

Question #2: Root causes

What are root causes of the current condition of the Hospital ?

Financial aspects…………………

No good and knowledgeable manager especially in term of financial

No system to controlling the expenses and deducting operation cost

Accumulation of lost from previous years regarding to balance sheet

Accounting receivable is high regards to balance sheet suggesting bad collection

Losses encountered year after year

Supply Demand

Question #3: Recommendations

• New CEO with specialize in financial management background

• To be specialize and focus in one field for e.g Eye, Heart instead generalize

• Sell some unnecessary assets and pay off liabilities

• Merger with another hospital

• To sale the share at rational price to buy and pay out bank debts to cut down the bank interest

***Base on the analysis Dr. Wright is NOT the man for the job***

What is the chosen recommendation for the hospital?

Question #4: Executing Implementation Plan

New CEO with specialize in financial management background

Liquidity

Activity

Leverage

Profitability Market Related

The new CEO must be able to makeMany solid decisions with regardsTo the 5 indices

By selling access equipment as wellSpace, the hospital can be lookingAt some level of liquidity to run the hospital

The CEO must gain back a good creditRatings from the supplier

**Buy on credit ---- sell on cash***

To create a brand image for the hospital

Looking at currentLooking at currentFinancial analysisFinancial analysis

Suggesting waysSuggesting waysTo cut backTo cut back

MarketingMarketingStrategyStrategy

DevelopmentDevelopment

Comparing with IndustryComparing with Industryaverageaverage

BusinessBusinessAnalysisAnalysis

Supplier &Supplier &Bank credit ratingBank credit rating

Market Market penetrationpenetration

CommercializationCommercialization

Question #4: Executing Implementation Plan

Thank you…