Consider this income statement: Green Valley Nursing Home, Inc. Statement of Income Year Ended December 31, 2020 Revenue: Net resident services revenue $3,053,258 Other revenue 106,146 Total revenues $3,159,404 Expenses: Salaries and benefits $1,515,438 Medical supplies and drugs 966,781 Insurance and other 296,357 Depreciation 85,000 Interest 206,780 Total expenses $3,070,356 Operating income $ 89,048 Income tax expense 31,167 Net income $ 57,881

a. How does this income statement differ from the ones presented in exhibit 3.1 and problem 3.2?

b. Why does Green Valley show an income tax expense, while the other two income statements do not?

c. What is Green Valleys total profit margin? How does this value compare with the values for Sunnyvale Clinic and BestCare?

d. The before-tax profit margin for Green Valley is operating income divided by total revenues. Calculate Green Valleys before-tax profit margin. Why might this be a better measure of expense control when comparing an investor-owned business with a not-for-profit business?

PROBLEM 3.2: Consider the following income statement: BestCare HMO Statement of Operations Year Ended June 30, 2020 (in thousands) Revenue: Healthcare premiums $26,682 Fees and other revenue 1,689 Net investment income 242 Total revenues $28,613 Benefits and expenses: Healthcare costs Operating expenses: $15,154 General and administrative expenses 7,874 Selling expenses 3,963 Interest expense 385 Total benefits and expenses $27,376 Net income $ 1,237.

a. How does this income statement differ from the one presented in exhibit 3.1?

b. What is BestCares total profit margin? How can it be interpreted?