a. How does this income statement differ from the ones presented in Exhibit 3.1 and Problem 3.2? b. Why does Green Valley show a provision
a. How does this income statement differ from the ones presented in Exhibit 3.1 and Problem 3.2?
b. Why does Green Valley show a provision for income taxes while the other two income statements did not?
c. What is Green Valleys total profit margin? How does this value compare with the values for Sunnyvale Clinic and BestCare?
d. The before-tax profit margin for Green Valley is operating income divided by total revenues. Calculate Green Valleys before-tax profit margin. Why may this be a better measure of expense control when comparing an investor-owned business with a not-for-profit business
Green Valley Nursing Home, Inc. Statement of Income Year Ended December 31, 2011 1 $ Revenue: Net patient service revenue Other revenue Total revenues 3,163,258 106,146 3,269,404 $ Expenses: Salaries and benefits Medical supplies and drugs Insurance and other Provision for bad debts Depreciation Interest Total expenses Operating income Provision for income taxes Net income 1,515,438 966,781 296,357 110,000 85,000 206,780 3,180,356 89,048 31,167 57,881 $ $ L 2011 2010 Exhibit 3.1: Sunnyvale Clinic Revenues: Net patient service revenue Premium revenue Other revenue Total revenues 1 3 150,118 $ 18,782 ,079 | 171,979 $ 123,565 16,455 2,704 142,724 $ Expenses: Salaries and benefits Supplies Insurance Lease Depreciation Provision for bad debts Interest Total expenses 126,223 $ 20,568 4,518 3,189 6,405 2,000 5,329 168,232 $ 102,334 18,673 3,710 2,603 5,798 1,800 3,476 138,394 Operating income $ 3,747 $ 4,330 $ Nonoperating income: Contributions Investment income Total nonoperating income 243 $ 3,870 4,113 $ 198 3,678 3,876 $ Net income 7,860 $ 8,206 Problem 3.2: BestCare HMO Statement of Operations Year Ended June 30, 2011 (in thousands $ Revenue: Premiums Earned Coinsurance Interest and other income Total revenues 26,682 1,689 242 28,613 $ Expenses: Salaries and benefits Medical supplies and drugs Insurance Provision for bad debts Depreciation Interest Total expenses Net income 15,154 7,507 3,963 19 367 385 27,395 1,218 Green Valley Nursing Home, Inc. Statement of Income Year Ended December 31, 2011 1 $ Revenue: Net patient service revenue Other revenue Total revenues 3,163,258 106,146 3,269,404 $ Expenses: Salaries and benefits Medical supplies and drugs Insurance and other Provision for bad debts Depreciation Interest Total expenses Operating income Provision for income taxes Net income 1,515,438 966,781 296,357 110,000 85,000 206,780 3,180,356 89,048 31,167 57,881 $ $ L 2011 2010 Exhibit 3.1: Sunnyvale Clinic Revenues: Net patient service revenue Premium revenue Other revenue Total revenues 1 3 150,118 $ 18,782 ,079 | 171,979 $ 123,565 16,455 2,704 142,724 $ Expenses: Salaries and benefits Supplies Insurance Lease Depreciation Provision for bad debts Interest Total expenses 126,223 $ 20,568 4,518 3,189 6,405 2,000 5,329 168,232 $ 102,334 18,673 3,710 2,603 5,798 1,800 3,476 138,394 Operating income $ 3,747 $ 4,330 $ Nonoperating income: Contributions Investment income Total nonoperating income 243 $ 3,870 4,113 $ 198 3,678 3,876 $ Net income 7,860 $ 8,206 Problem 3.2: BestCare HMO Statement of Operations Year Ended June 30, 2011 (in thousands $ Revenue: Premiums Earned Coinsurance Interest and other income Total revenues 26,682 1,689 242 28,613 $ Expenses: Salaries and benefits Medical supplies and drugs Insurance Provision for bad debts Depreciation Interest Total expenses Net income 15,154 7,507 3,963 19 367 385 27,395 1,218
