Calculate and show the debt service coverage ratio for these two hospitals.
Which would be more likely to get a loan using debt financing? Why?
Which would be more likely to use equity financing? Why?
Hospital 1Hospital 2
Current Liabilities $145,685,000 $224,790,000
Excess of Revenue over Expenses $33,000,000 $3,500,000
Depreciation and Amortization $4,010,101 $7,645,000
Annual Debt Service Payments $6,435,000 $13,000,000
Current Assets $184,500,000 $223,400,000
Interest $2,750,000 $4,125,000
Principal Payments $10,000,000 $15,000,000