Green Valley Nursing Home, Inc. is a for-profit, long-term care facility. You have been provided the statement of operations and balance sheet for this facility (provided in the Week 07 IA.xlsx file). Based on this information, answer the questions below.

1. Calculate the ratios identified on the Ratio Analysis worksheet. Provide a screenshot below of the results of these calculations. No typed answer is required for this question.

2. What does the current ratio mean for Green Valley (what does this ratio day about cash and liabilities)?

3. Is the days cash on hand for Green Valley better or worse than the peer group average? Why?

4. How much of the firms total financing has been supplied by creditors? How did you determine this answer?

5. If you were a bank that Green Valley approached for a loan, would you feel Green Valley is a good risk? Why or why not?

6. Complete a Du Pont analysis for Green Valley using the Du Pont worksheet. Based on this analysis, is Green Valley controlling expenses better or worse than their peer group average. Why?

7. Based on the Du Pont analysis, why is the ROE higher the peer group average?

8. Reviewing the complete financial condition analysis (ratio analysis and Du Pont), what are positive (strong) aspects of Green Valleys financial position? Why?

9. Reviewing the complete financial condition analysis (ratio analysis and Du Point), what are negative (weak) aspects of Green Valleys financial position? Why?

10. Overall, would you consider Green Valleys financial position strong or weak? Why? (Note: You must choose either strong or weak assume we only have the information provided from which to make this decision.)

STATEMENT OF OPERATIONS (in dollars)	2020
Revenues
Net patient service revenue	$ 3,163,258
Other revenue	$ 106,146
Total operating revenue	$ 3,269,404
Expenses
Salaries and benefits	$ 1,515,438
Medical supplies and drugs	$ 966,781
Insurance and other	$ 296,357
Rent	$ 110,000
Depreciation	$ 85,000
Interest expense	$ 206,780
Total expenses	$ 3,180,356
Income
Operating income	$ 89,048
Provision for income taxes	$ 31,167
Net income	$ 57,881
EBIT	$ 295,828
Retained earnings
Retained earnings (beginning of year)	$ 199,961
Retained earnings (end of year)	$ 257,842

BALANCE SHEET (in dollars)	2020
Assets
Cash and equivalents	$ 105,737
Marketable securities	$ 200,000
Net patient accounts receivable	$ 215,600
Supplies	$ 87,655
Total current assets	$ 608,992
Gross property and equipment	$ 2,250,000
Accumulated depreciation	$ 356,000
Net property and equipment	$ 1,894,000
Total assets	$ 2,502,992
Liabilities
Accounts payable	$ 72,250
Accrued expenses	$ 192,900
Notes payable	$ 100,000
Current portion of long-term debt	$ 80,000
Total current liabilities	$ 445,150
Long-term debt	$ 1,700,000
Total long-term liabilities	$ 1,700,000
Total liabilities	$ 2,145,150
Shareholders' equity
Common stock ($10 par value)	$ 100,000
Retained earnings	$ 257,842
Total shareholders' equity	$ 357,842
Net assets and liabilities
Net assets (equity)	$ 357,842
Total liabilities and net assets	$ 2,502,992

RATIO ANALYSIS	2018	Peer Group Average	Calculation
Profitability Ratios
Total margin		3.50%	Net income/total operating revenue
Return on assets (ROA)		5.20%	Net income/total assets
Return on equity (ROE)		13.10%	Net income/total equity
Liquidity Ratios
Current ratio		2.00	Current assets/current liabilities
Days cash on hand		22.00	(Cash and equivalents + marketable securities) / ((expenses - depreciation) / 365)
Debt Management (Capital Structure) Ratios
Debt ratio		71.00%	Total debt/total assets
Debt-to-equity ratio		2.50	Total debt/Total equity assets
Times-interest-earned ratio		2.60	EBIT/interest expense
Asset Management (Activity) Ratios
Fixed asset turnover		1.40	Total revenues/net fixed assets
Total asset turnover		1.50	Total revenues/total assets
Days in patient accounts receivable		19.00	Net patient accounts receivable / (net patient service revenue / 365)
Other Ratios
Equity multiplier		2.50	1 / (1 - Debt ratio)

DU PONT ANALYSIS	2018	Industry average
Total margin (TM)		3.50%
Total asset turnover (TATO)		1.50
Return on assets (ROA)		5.25%
Equity multiplier (EM)		2.50
Du Pont equation ROE		13.13%