BestCare HMO Statement of Operations and Change in Net Assets Year Ended June 30, 2007 (in thousands) Revenue: Premiums earned $26,682 Co-insurance 1,689 Interest and other income 242 Total revenue $28,613 Expenses: Salaries and benefits $15,154 Medical supplies and drugs 7,507 Insurance 3.963 Provision for bad debts 19 Depreciation 367 Interest 385 Total expenses $27,395 Net income $1,218 Net assets, beginning of year $900 Net assets, end of year $2,118

BestCare HMO Balance Sheet June 30, 2007 (in thousands) Assets Cash and cash equivalents $2,737 Net premiums receivable 821 Supplies 387 Total current assets $3,945 Net property and equipment $5,924 Total assets $9,869 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 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 Best Care 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

Calculate total margin

Calculate return on assets

calculate return on equity and conduct a dupont analysis based on the financial statement information