1. What numbers plug in for Equity Multiplier from this problem 1? I have Total Revenue as $3,000,000/1,000,000 net assets end of year.

2. What am I doing wrong on Occupancy rate B44for problem assigned 4?

A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 B C D E F NAME: PROBLEM SET 6 Chapter 13 -- Financial Condition Analysis Assigned Problem 1 Southwest Physicians, a medical group practice, is just being formed. It will need $2 million of total assets to generate $3 million in revenues. Furthermore, the group expects to have a profit margin of 5 percent. The group is considering two financing alternatives. First, it can use all-equity financing by requiring each physician to contribute his or her pro rata share. Alternatively, the practice can finance up to 50 percent of its assets with a bank loan. Assuming that the debt alternative has no impact on the expected profit margin, what is the difference between the ROE if the group finances with 50 percent debt versus the ROE if it finances entirely with equity capital? ANSWER G H 1 2 3 4 5 6 7 8 9 10 11 12 13 14 I A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 B C D E F G H I diga PROBLEM SET 6 Chapter 13 -- Financial Condition Analysis Assigned Problem 2 Bayside Memorial Hospital's financial statements are presented in Exhibits 13.1, 13.2, and 13.3 in the textbook. a. Calculate Bayside's financial ratios for 2009. Assume that Bayside had $1 million in lease payments and $1.4 million in debt principal repayments in 2013. (Hint: Use the textbook discussion to report the 2014 financila ratios and the Industry averages) b. Interpret the ratios. Use both trend and comparative analysis. For the comparative analysis, assume that the industry average data presented in the textbook is valid for both 2013 and 2014. ANSWER a. Profitability ratios: Total margin = Net income / Total revenues Return on assets = Net income / Total assets Return on equity = Net income / Total equity Liquidity ratios: Current ratio = Current assets / Current liabilities Days cash on hand = Cash + Marketable securities (Expenses - Depreciation - Uncollectibles / 365) Debt management ratios: Debt ratio = Total debt / Total assets Debt to equity ratio = Total debt / Total equity TIE ratio = EBIT / Interest expense CFC ratio = EBIT + Lease payments + Depreciation expense Interest expense + Lease payments + Debt principal / (1-T) Asset management ratios: Fixed asset turnover = Total revenues / Net fixed assets Total asset turnover ratio = Total revenues / Total assets Days in patient accounts receivable = Net patient accounts receivable Net patient services revenue / 365 Other ratios: Average age of plant = Accumulated depreciation Depreciation expense 2014 2013 Industry A 42 b. B C D E F G H I NAME: PROBLEM SET 6 Chapter 13 -- Financial Condition Analysis Assigned Problem 3 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, 2016 (in thousands) Revenue: Premiums earned Coinsurance Interest and other income Total revenue Expenses: Salaries and benefits Medical supplies and drugs Insurance Rent Depreciation Interest Total expenses Net income Net assets, beginning of year Net assets, end of year $26,682 $1,689 $242 $28,613 $15,154 $7,507 $3,963 $19 $367 $385 $27,395 $1,218 $900 $2,118 BestCare HMO Balance Sheet Year Ended June 30, 2016 (in thousands) Assets Cash and cash equivalents Net premiums receivable Supplies Total current assets Net property and equipment Total assets $2,737 $821 $387 $3,945 $5,924 $9,869 Liabilities and Net Assets Accounts payable - medical services Accrued expenses Notes payable Current portion of long-term debt Total current liabilities Long-term debt Total liabilities Net assets (equity) Total liabilities and net assets $2,145 $929 $141 $241 $3,456 $4,295 $7,751 $2,118 $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 following ratios for BestCare: Industry average Return on assets (ROA) 8.0% Current ratio 1.3 Days cash on hand 41 days Average 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 ANSWER a. ROE Net income Total equity = = Total margin Net income Total revenue X X Total asset turnover Total revenue Total assets X X Equity multiplier Total assets Total equity BestCare $1,218 $2,118 57.51% $1,218 $28,613 4.26% $28,613 $9,869 2.90 $28,613 $2,118 13.51 Industry 25.5% 3.8% 2.1 3.2 b. Return on assets = Current ratio = Days cash on hand = Average collection period = Debt ratio = Debt to equity ratio = TIE ratio = Fixed asset turnover = BestCare 12.3% 1.1 0.1 Industry 8.0% 1.3 41 days 2.9% 7 days 43.5% 2.03 15.5 4.8 69% 2.2 2.8 5.2 NAME: PROBLEM SET 6 Chapter 13 -- Financial Condition Analysis Assigned Problem 4 Palm Viewl Hospital has the following financial data and operational metrics: Number of beds 350 Total inpatient admissions 12,250 Total outpatients visits 90,754 Total patient revenues $111,900,060 Outpatient mix 16.20% Medicare payment percentage (revenues) 28.00% Average length of stay (in days) 6.5 Net price per discharge $7,653 Cost per discharge $6,292 a. Calculate the hospital's profit per discharge? b. Calculate the hospital's total outpatient revenues and the total inpatient revenues? (Hint: Use the outpatient mix metric.) c. Verify your Part b answer for total inpatient revenues using volume and profitability metrics. (Hint: Calculate price per discharge.) d. What are the hospital's total revenues from Medicare patients? e. On average, what is the total number of inpatient days? f. What is then hospital's occupancy rate? ANSWER a. Profit per discharge b. If using the outpatient mix metric: Total outpatient revenues Total inpatient revenues $1,361 $18,127,810 $93,772,250 c. If using the volume and profitability metrics: Total inpatient revenues $93,749,250 d. Total revenues from Medicare patients e. Total number of inpatient days f. Occupancy rate $31,332,017 79,625 75833.33%