(Assessment of a Hospital's Accounts Receivable Collection Efficiency)

question 24

Essay

(Assessment of a hospital's accounts receivable collection efficiency)
Assess Plains Regional Hospital's accounts receivable collection efficiency based on the following set of facts:
a.Days' revenue in patient accounts receivable at December 31,2012,for Plains Regional Hospital - 76 days
b.Extracts from Plains Regional Hospital's calendar year 2013 financial statements:
Net patient accounts receivable,$16.4 million
Net patient service revenue,$75 million
c.Days' revenue in patient accounts receivable at December 31,2013 for hospitals of comparable size - 65 days

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Definitions:

360-Day Year

A simplified method of calculating interest using a 360-day year instead of 365 days, commonly used in banking.

Exact Simple Interest

Refers to interest calculated precisely on the principal amount of a loan or investment, without compounding, over a specific time period.

365-Day Year

A method of interest calculation that uses a full calendar year to determine the amount due.

Loan Period

The duration of time from the initiation to the full repayment of a loan.