HSA525 Finance: Financial Performance and Merger Assessment Report

This report conducts a comprehensive financial analysis of American Shared Hospital Services (ASHS) and CVS Health Corporation, focusing on their financial performance and potential merger implications. The analysis involves ratio analysis, evaluating profitability, liquidity, leverage, and valuation trends from 2016 to 2017. Key financial drivers for mergers in the healthcare industry, such as growth, profitability, leverage, and valuation are examined. The report assesses post-merger financial performance criteria, emphasizing management efficiency and market share expansion. It also discusses the financial stability of the healthcare industry, highlighting challenges like rising expenses and the role of mergers and acquisitions. The conclusion summarizes the financial performance of both companies and key aspects considered in the context of a merger and acquisition scenario.

Running head: FINANCE
Financial Performance Assessment
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Table of Contents
Introduction......................................................................................................................................2
Ratio Analysis..............................................................................................................................2
Key Financial Drivers..................................................................................................................3
Post-Merger Analysis..................................................................................................................4
Financial Stability........................................................................................................................4
Conclusion.......................................................................................................................................5
References........................................................................................................................................6
Appendix..........................................................................................................................................7

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Introduction
The financial analysis of the company are done to assess the financial performance of the
company. Assessment of the financial condition is done for reviewing the financial position of
the company and the performance of the company in the trend period analysed for the company.
The companies analysed for the purpose of the merger and acquisition where the American
Shared Hospital Services and CVS Health Corporation. The financial analysis was prepared for a
sum of three years for the company and the ability of the company for merging with the other
competitors was taken into consideration. CVS Health Corporation will be acquiring the
American Shared Hospital Services as an inorganic growth strategy that will be followed for
easing the business services of the company.
Ratio Analysis
Ratio Analysis is a quantitative assessment tools used for assessing the financial
performance of the company. The ratio analysis was done for a sum of two years for the
companies in which the profitability, liquidity, leverage and valuation for the company was
assessed in the period 2016 & 2017. Profitability for ASHS Hospital Services has been done for
assessing the financial performance of the company where the profitability for the company has
been stable where the return on capital employed for the company has been rising (American
Shared Hospital Services Annual Report 2017, 2018). The return on capital employed for the
ASHS Company was around 3.42% in the year 2016 and 6.43% in the year 2017. The liquidity
position of the company has also improved for the company (CVS Health Annual Report 2017,
2018). The current ratio for the company was around 0.91 times in the year 2016 and 0.99 times
in the year 2017. Debt to Equity Ratio for the ASHS Hospital was around 73.45% in the year

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2016 and was around 53.10% in the year 2017. The ratio analysis for both the company has been
performed for assessing the financial conditions of both the company (Appendix 1 & 2).
Key Financial Drivers
The key financial drivers that will be used for identifying the strengths in the health care
industry causing organisations to merge are:
 Growth: The financial performance of the ASHS Company has been improving in terms
of profitability of the company with the increase in the business scale operations are some
of the key points. The wide portfolio of products and services will enable the CVS Health
Company to increase the market share in the health industry (CVS Health Annual Report
2017, 2018).
 Profitability: The Operating profit margin for the ASHS Company has been well where
the operating profit of the company has been around 12.34% and 17.57% in the last two
years, which is much higher than the CVS Health Company (American Shared Hospital
Services Annual Report 2017, 2018). However, the net profitability position of the
company could be improved with the help of the management efficiency and strategies.
 Leverage: The financial leverage for the ASHS Ltd Company has significantly reduced
in the financial year 2016 and 2017 where the company has reduced the financial risk of
the company. The percentage of debt was much lower when compared with the CVS
Health Company, which was having the debt at around 71.07% and 85.19%.
 Valuation: The valuation of the ASHS Company was done with the help of the price to
earnings ratio where the P/E ratio for the company was much lower showing relatively
lower valuation of the company in terms of the pricing of the company (American Shared
Hospital Services Annual Report 2017, 2018).

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 Size: The size of the company in terms of the equity and asset value of the ASHS Ltd
Company was lower than the CVS Health Company. The equity base for the CVS Ltd
Company was around 95 million on the other hand side the equity base of ASHS Ltd
Company was around 29 million.
Post-Merger Analysis
After the post-merger, it is essential for determining the financial performance of the
company in terms of financial position of the company. The operating profit of the joint
company would improve where the efficiency of the management in managing the operations of
the company would be the key benefit. The key thing that would be improving for the company
is the wide scale of operations and the increase in the market share of the company. The leverage
for the company would also improve after the joint merger acquisition. After the acquisition of
the company the key financial factor that would be observed will be the efficiency of the
company, profitability of the company and the management of resources by the company.
Financial Stability
The financial stability of the health care industry is dependent on the rising demands for
health care services. The development of technological up gradation and increase in medical
research are some of the continuous research and development. The falling margins for the
company and the rising expenses for the company in the form of operating expenses of the
company are the key concern of the health industry. The growth of the operating revenue for the
health industry has been around 6.6% but the growth in the expenses of the company on the other
hand has been around 7.5%(10 top healthcare finance trends of 2017, 2018). With the rising
competitions and many players in the health care industries mergers and acquisitions would be
seen in the industry as the possible way for surviving in the health care industry. Larger

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Companies and organisations would be making several strategies for acquiring the smaller
organisation in the form of inorganic growth as the scope for organic growth in the industry is
expected (Burns & Pauly, 2018).
However, on the other hand increasing research in medical field and technological
advancement in the utilisation and management of resources may bring a turnaround in the
company. Application of Big Data Analysis and Bloch Chain technology in the operations of the
company is expected to bring operational efficiency in the company.
Conclusion
The financial analysis of the ASHS Company and CVS Company was done thereby
assessing the financial performance of both the company and the current financial position of the
companies in the context of merger and acquisition. The key drivers in the health industry and
the forecast for the health industry were some of the key aspects that were taken into
consideration for the purpose of financial analysis.

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References
10 top healthcare finance trends of 2017. (2018). Retrieved from
https://www.healthcarefinancenews.com/news/10-top-healthcare-finance-trends-2017
6 Key Financial Indicators Of Attractive Acquisition Targets. (2018). Retrieved from
https://www.forbes.com/sites/mattporzio/2016/10/03/6-key-financial-indicators-of-
attractive-acquisition-targets/#2ecbb6671ab3
American Shared Hospital Services Annual Report 2017. (2018). Retrieved from
http://www.ashs.com/ASHS%202017%20Annual%20Report%20Final.pdf
Burns, L. R., & Pauly, M. V. (2018). Transformation of the health care industry: curb your
enthusiasm?. The Milbank Quarterly, 96(1), 57-109.
CVS Health Annual Report 2017. (2018). Retrieved from
http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_CVS_2017.pdf

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Appendix
1) Ratio Analysis of American Shared Hospital Services Ltd
Ratio Analysis of American Shared Hospital Services
Ltd
Particulars 2017 2016
Profitability Ratio
Net Income 1923 930
Total Shareholders Equity 29,885 27,173
Return on Capital Employed 6.43% 3.42%
Operating Income 2413 3286
Sales 19556 18700
Operating Profit Margin 12.34% 17.57%
Liquidity Ratio
Current Assets 8,893 7,886
Current Liabilities 9,007 8,681
Current Ratio 0.98734 0.90842
Gearing Ratio
Total Long Term Debt 15870 19958
Shareholder's Equity 29,885 27,173
Debt to Equity Ratio 53.10% 73.45%
Valuation Ratio
Price Per Share 2.6 3.35
Earnings Per Share 0.33 0.17
Price to Earnings Ratio 7.878788 19.706

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2) Ratio Analysis of CVS Health Corporation
Ratio Analysis of CVS Health Corporation
Particulars 2017 2016
Profitability Ratio
Net Income 6622 5317
Total Shareholders’ Equity 95,131 94,462
Return on Capital Employed 6.96% 5.63%
Operating Income 9517 10366
Sales
184,76
5
177,52
6
Operating Profit Margin 5.15% 5.84%
Liquidity Ratio
Current Assets 31,229 31,042
Current Liabilities 30,648 26,250
Current Ratio
1.0189
6
1.1825
5
Gearing Ratio
Total Long Term Debt 26788 31378
Shareholder's Equity 37,695 36,834
Debt to Equity Ratio 71.07% 85.19%
Valuation Ratio
Price Per Share 72.5 78.91
Earnings Per Share 2.0 1.7
Price to Earnings Ratio 36.25 46.418