consider the following financial statements for BestCare HMO, a not for profit m
ID: 2677306 • Letter: C
Question
consider the following financial statements for BestCare HMO, a not for profit managed care plan:
_________________________________________________________________________________________
BestCare HMO
statement of operations and change in net assets
year ended june 30,2011
(in thousands)
__________________________________________________________________________________________
revenue:
premiums earned --------------------------- $26,682
co insurance ------------------------------- 1,689
interest and other income ---------------- 242
_______
total revenue -------------------------- $28,613
expenses:
salaries and benefits ------------------------ $15,154
medical supplies and drugs ----------------- 7,507
insurance ------------------------------------- 3,963
provision for baddebts --------------------- 19
depreciation -------------------------------- 367
interest ------------------------------------- 385
________
total expenses -----------------------------$27,395
________
net income -------------------------------- $1,218
_______
________
net assets,beginning of year ------------- $900
_______
net assets, end of year ------------------- $ 2,118
assets
cash and cash equivalents ------------- $ 2,737
net premiums receivable --------------- 821
supplies --------------------------------- 387
______
total current assets -------------------- $3945
________
net property and equipment ---------- $5,924
________
total assets ----------------------------- $9,869
liabilities and net assets
accounts payable-medical services---- $2,145
accrued expense ----------------------- 929
notes payable -------------------------- 141
current portion of long term debt ----- 241
_____
total current liabilities ------------------ $3,456
________
long term debt ------------------------ $4,295
________
total liabilities ------------------------- $7,751
_______
net assets(equity) ------------------- $2,118
_______
total liabilities and net assets---------- $ 9,869
a. perform a Du Pont analysis on BestCare. assume that the industry average ratios are as follows:
total margin ------- 3.8%
total asset turnover -- 2.1
equity multiplier ----- 3.2
return on equity(ROE) -- 25.5%
b. calculate and interpret the followingratios for BestCare:
-------------------- industry avg ----
return on assets(ROA) ------ 8.0%
current ratio ----------------- 1.3
days cash on hand ----------- 41 days
avg collection period ---------- 7 days
debt ratio ----------------------- 69%
debt to equity ratio ------------ 2.2
times interest earned(TIE)ratio -- 2.8
fixed asset turnover ratio ------- 5.2
Explanation / Answer
Perform a DUPont analysis on total margin of 3.8%
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