13.4 Consider the following financial statements for BestCare, a not-for-profit health insurer. BestCare Health Insurer Statement of Operations, Year Ended June 30, 2016 (in Thousands) Revenue Healthcare premiums $26,682 Fees and other revenue 1,689 Net investment income 242 Total revenues $28,613 Benefits and expenses Healthcare costs $ 15,154 Operating expenses Selling expenses 3,963 General and administrative 7,893 expenses Interest expense 385 Total expenses $27,395 Net income $ 1,218 BestCare Health Insurer Balance Sheet, June 30, 2016 (in Thousands) ASSETS Cash and cash equivalents $2,737 Net premiums receivable 821 Other current assets 387 Total current assets $3,945 Long-term investments $4,424 Net property and equipment $1,500 Total assets $9,869 LIABILITIES AND EQUITY Healthcare costs payable $2,145 Accrued expenses 929 Unearned premiums Total current liabilities $3,456 Long-term debt $4,295 Total liabilities $7,751 Equity $ 2,118 Total liabilities and equity $9,869 382 a. Perform a DuPont analysis on BestCare. Assume that the sector average ratios are as follows: 3.8% 2.1 Total margin Total asset turnover Equity multiplier Return on equity 3.2 25.5% b. Calculate and interpret the following ratios for BestCare. Sector Average 8.0% Return on assets Current ratio DCOH (assume depreciation expense is $367) Average collection period Debt ratio Debt-to-equity ratio Times interest earned ratio Fixed-asset turnover ratio 1.3 41 days 7 days 69% 2.2 2.8 18.5 13.4 Consider the following financial statements for BestCare, a not-for-profit health insurer. BestCare Health Insurer Statement of Operations, Year Ended June 30, 2016 (in Thousands) Revenue Healthcare premiums $26,682 Fees and other revenue 1,689 Net investment income 242 Total revenues $28,613 Benefits and expenses Healthcare costs $ 15,154 Operating expenses Selling expenses 3,963 General and administrative 7,893 expenses Interest expense 385 Total expenses $27,395 Net income $ 1,218 BestCare Health Insurer Balance Sheet, June 30, 2016 (in Thousands) ASSETS Cash and cash equivalents $2,737 Net premiums receivable 821 Other current assets 387 Total current assets $3,945 Long-term investments $4,424 Net property and equipment $1,500 Total assets $9,869 LIABILITIES AND EQUITY Healthcare costs payable $2,145 Accrued expenses 929 Unearned premiums Total current liabilities $3,456 Long-term debt $4,295 Total liabilities $7,751 Equity $ 2,118 Total liabilities and equity $9,869 382 a. Perform a DuPont analysis on BestCare. Assume that the sector average ratios are as follows: 3.8% 2.1 Total margin Total asset turnover Equity multiplier Return on equity 3.2 25.5% b. Calculate and interpret the following ratios for BestCare. Sector Average 8.0% Return on assets Current ratio DCOH (assume depreciation expense is $367) Average collection period Debt ratio Debt-to-equity ratio Times interest earned ratio Fixed-asset turnover ratio 1.3 41 days 7 days 69% 2.2 2.8 18.5