Best Care 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 $26,613

Expenses:

Salaries and benefits $15,154

Medical supplies and drugs 7,507

Insurance 3,963

Provision for bad debts19

Depreciation 367

Interest385

Total $27,395

Net Income $1,218

Net assets, beginning of year 900

Net assets, end of year $2,118

Best Care HMO Balance Sheet June 30, 2011 ( in thousands )

Assets

Cash and cash equivalents$2,737

Net premiums receivable825

Supplies

Total current assets $3,945

Net propertyand equipment 5,924

Total Assets9,869

Liabilities and Net Assets

Accounts payable-medical services $2,145

accrued expenses 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 ratio 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 ratio2,2

Times interest earned (TIE) ratio 2.8

Fixed asset turnover ratio 5.2