Consider the following financial statements for BestCare HMO, a not-for-profit managed care plan:

BestCare Health Insurer Statement of Operations Year Ended June 30, 2016(in thousands) Revenue: Premiums earned $26,682 Fees and other revenue $1,689 Net Investment income $242 Total revenue $28,613

Benefits and Expenses: Healthcare Costs $15,154

Operating Expenses: General and Administrative $7,893 Selling Expenses $3,963 Interest $385 Total expenses $27,395 Net income $1,218 BestCare HMO Balance Sheet Year Ended June 30, 2016 (in thousands) Assets Cash and cash equivalents $2,737 Net premiums receivable $821 Other Current Assets $387 Total current assets $3,945 Long Term Investments $4,424

Net Property and Equipment $1,500 Total assets $9,869 Liabilities and Equity Healthcare Costs payable $2,145 Accrued expenses $929 Unearned Premiums $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:

Sector Average

Return on assets 8.0%

Current Ratio 1.3

Days cash on hand(assume depreciation expense is $367) 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