Consider the following financial statements for BestCare HMO, a not-for-profit managed care plan: BestCare HMO Statement of Operations and Change in Net Assets Year Ended June 30, 2012 (in thousands) Revenue: Premiums earned $26,682 Coinsurance $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 Year Ended June 30, 2012 (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 - unrestricted (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 BestCare:

Industry Average

Return on assets 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 ratio 2.8

Fixed asset turnover ratio 5.2