Question
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
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
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