Average Payment Period Ratio = Current Liabilities / ([Total Operating Expenses – Depreciation and Amortization Expenses] / 365)
Part 1: Average Payment Period Ratio Report Development
For this assignment, you will develop and analyze financial statements. Part 1 of the assignment includes describing what an average payment period is and how it is calculated. Use the years and the dollar amounts provided in the table below:
Depreciation and Amortization
Days per Year
Average Cash Expense per Day
Average Cash Expense Per Day
Average Payment Period Days
Using an Excel spreadsheet (or any other tool for performing calculations), determine the average payment period for FY2011 and FY2012. Use the following steps:
- Use the provided dollar amount of total operating expenses and depreciation and amortization.
- Subtract depreciation and amortization from the operating expenses and divide by 365 days to compute the average cash expense per day.
- Identify the dollar amounts for current liabilities on the balance sheet.
- Divide the current liabilities by the average cash per day.
- Determine if the trend is positive or negative for the average payment period days.
- Determine if the 2011 and 2012 average payment period days are above or below the industry benchmark.
Part 2: Risks and Benefits Analysis
Based on your calculations in Part 1, address the following:
- Identify at least two risks if the trend is negative or two benefits if it is positive. What is the potential impact on the hospital? Support your assertions with authoritative references.
- Discuss possible contributing factors to the positive or negative trend and any strategies the hospital could use to ensure the currently established industry benchmark is met.
Develop an 8–10-slide PowerPoint presentation (excluding the title and reference slides).
Include the completed average payment period ratio table in your presentation. Include detailed speaker notes with APA format, including references. Use a properly formatted APA 6th edition figure caption for the table or any other figures or charts. Use at least 5–7 scholarly sources in your research.
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