This analysis will evaluate Hillside, Inc., a medical supply company, as a potential acquisition target for your hospital to improve supply availability. We’ll use financial ratios calculated from Hillside’s balance sheet and income statement to assess its financial health and make a recommendation.

Preparation:

1. Gather Financial Statements: Obtain Hillside, Inc.’s most recent balance sheet and income statement.
2. Financial Ratio Calculations:
   • We’ll need to calculate various financial ratios using the data from the financial statements. These ratios will provide insights into different aspects of Hillside’s financial performance, liquidity, solvency, profitability, and efficiency.

Analysis Steps:

Part 1: Matching Questions (Sample Matching Questions)

This section might include matching questions that test your understanding of financial ratios. Here are some examples:

• Matching Question: Which ratio measures a company’s ability to meet its short-term obligations?
  • A. Current Ratio
  • B. Debt-to-Equity Ratio
  • C. Return on Equity (ROE)
• Matching Question: Which ratio indicates how efficiently a company uses its assets to generate sales?
  • A. Inventory Turnover Ratio
  • B. Gross Profit Margin
  • C. Earnings per Share (EPS)

Part 2: Financial Ratio Calculations

Here, we’ll perform calculations for key financial ratios using the data from Hillside’s financial statements. Some important ratios to consider include:

• Liquidity Ratios:
  • Current Ratio (Current Assets / Current Liabilities)
  • Quick Ratio (Current Assets – Inventory / Current Liabilities)
• Solvency Ratios:
  • Debt-to-Equity Ratio (Total Liabilities / Shareholders’ Equity)
• Profitability Ratios:
  • Gross Profit Margin ((Gross Profit / Revenue) x 100%)
  • Net Profit Margin ((Net Income / Revenue) x 100%)
  • Return on Equity (ROE) (Net Income / Shareholders’ Equity)
• Efficiency Ratios:
  • Inventory Turnover Ratio (Cost of Goods Sold / Average Inventory)

Part 3: Financial Performance Summary

After calculating the ratios, analyze them to understand Hillside’s financial health. Consider factors like:

• Liquidity: Can Hillside meet its short-term obligations?
• Solvency: Is Hillside financially stable in the long run?
• Profitability: Is Hillside generating profits?
• Efficiency: Is Hillside managing its assets effectively?

Recommendation:

Based on the analysis of financial ratios and overall financial health, make a recommendation on whether acquiring Hillside, Inc. would be beneficial for the hospital in terms of improving medical supply availability. Consider factors like:

• Financial Strength: Is Hillside a financially sound company?
• Inventory Management: Does Hillside have a reliable inventory management system that aligns with your hospital’s needs?
• Integration Challenges: Are there potential challenges in integrating Hillside’s operations with the hospital?
• Long-Term Benefits: Will acquiring Hillside provide a stable and cost-effective source of medical supplies in the long run?

Conclusion:

This financial analysis should provide valuable insights into Hillside’s financial health and its suitability as an acquisition target. Consider presenting your findings and recommendations to the CFO in a clear and concise manner.