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Case Analysis: Bayou Clinic

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Answers for Candy a) Type of information each financial statement provides • Balance sheet Balance sheet reported assets, liabilities and stockholders' equity. Assets represent all the elements that a company owns and uses to generate revenue. Liabilities include money owed to creditors of assets or other financing purposes. The assets include investments made in the business or the capital invested by the owners (Collier, 2015). • Income statement The income statement reports the profit of the company during a given accounting period. Companies can determine both the gross profit and net profit from this information. Gross profit is the amount of money from the sale going to the cost of goods sold. Net income indicates what portion of sales …show more content…

In order to know the Bayou Clinic’s position or capabilities, Candy needs to evaluate the financial ratios of Bayou clinic. (Banerjee, 2015) stated that many financial ratios have been developed over the years to allow for easier analysis of key metrics. A set of relationships is known as liquidity ratios and is designed to measure the ability of the company to meet its current obligations. The cash ratio is a ratio often used to quantitatively measure liquidity, and is generally considered in conjunction with current and quick ratios. The cash ratio is the number of times that the company could meet its current obligations to its current cash balances. The higher the reserve ratio, the more likely a company will be able to pay its short-term debt. Shortly before failure, companies often have very low cash reserve ratio, low levels of inventories, receivables and relatively low current high ratios. Therefore, analyze that Bayou is lays on which position (Henderson et al., …show more content…

(Banerjee, 2015) Their results materialize the efficient management of the company, that is, how management has used the resources, provide more complete answers about what is being managed as effectively the company. For these reasons, management should ensure that the behavior of these indices, because while greater your results, the greater the prosperity for it. e) Evaluation of outstanding debt of Bayou Clinic Outstanding debt of Bayou clinic can be assessed through debt ratios. The debt ratio measures the intensity of all the debt of the company in relation to its funding, measures the percentage of total funds provided by creditors. However, Candy must analyze the interest coverage ratio and other ratios. Interest coverage ratios analyze the potential of company to pay its interest expense on outstanding debt. The lower the ratio, the more the company is loaded by the debt expense (Henderson et al., 2013). On the other hand, accounts payable ratio must also be assumed by Candy since it measures the speed through which company pay off its liabilities to suppliers. If this ratio declines from one period to next then it means that company is paying to suppliers with slow pace that shows the worsen financial condition of company (Henderson et al.,

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