DuPont Analysis Memo.

You are given financial statements for Best Care, which is a healthcare insurer. Your boss asked you to review these financial statements in this problem and to write a memo discussing the following:

* After performing the DuPont analysis, explain the analysis in your memo of your recommendation.

* Calculate the ratios provided here.

* Explain the results to your boss in your memo. The page following your memo should show the calculations for the DuPont analysis in your ratios.

Perform a DuPont analysis on BestCare.

Assume that the sector average ratios are as follows:

Total margin -3.8%

Total asset turnover _2.1

Equity multiplier -3.2

Return on equity -25.5%

b. Calculate and interpret the following ratios for BestCare.

Return on assets - 8%

Current ratio - 1:3

DCOH (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

13.4 Consider the following financial statements for BestCare, a not-for-profit health insurer. BestCare Health Insurer Statement of Operations, Year Ended June 30, 2016 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 $ 15,154 Operating expenses Selling expenses 3,963 General and administrative 7,893 expenses Interest expense 385 Total expenses $27,395 Net income $ 1,218 p. 413 BestCare Health Insurer Balance Sheet, 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