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: healthcare premiums $26,682 fees and other revenue $1,689 net investment $242 Total revenue $28,613 Expenses: healthcare cost $15,154

Operating expense

selling expense 3,963 General and administrative expenses 7,893 expenses

interest expense 385 total expenses $27,395 net income $1,218 BestCare HMO Balance Sheet Year Ended June 30, 2012 (in thousands) Assets Cash and cash equivalents $2,737

net premiums receivable 821 other current assets $387 total current assets $3,945 long term investment $ 4,424 Net property and equipment $1,500 Total assets $9,869 Liabilities and equity healthcare costs payable $2,145 Accrued expenses $929 unearned preiums 382 Total current liabilities $3,456 Long-term debt $4,295 Total liabilities $7,751 (equity) $2,118 Total liabilities and equity $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 18.5