Green Valley Nursing Home, Inc., Statement of Income and Retained Earnings, Year Ended December 31, 2015 Revenue Net patient service revenue $3,163,258 106,146 $3,269,404 Other revenue Total revenues xpenses: Salaries and benefits $1,515,438 Medical supplies and drugs 966,781 296,357 Insurance Provision for bad debts 110,000 Depreciation 85,000 206,780 $3,180,356 89,048 Interest Total expenses Operating income Provision for income taxes 31,167 57,881 Net income $ 199,961 $ 257,842 Retained carnings, beginning of year Retained earnings, end of year Green Valley Nursing Home, Inc., Balance Sheet, December 31, 2015 Assets Current Assets $105,737 Cash Marketable securities 200,000 Net patient accounts receivable 215,600 Supplies 87,655 $ 608,992 Total current assets $2,250,000 Property and equipment Less accumulated depreciation Net property and equipment 356,000 $1,894,000 $2,502,992 Total assets (continued) (continued from previous page) Liabilities and Shareholders Equity Current Liabilities: Accounts payable 72,250 Accrued expenses 192,900 Notes payable 100,000 80,000 S 445,150 $1,700,000 Current portion of long-term debt Total current liabilities Long-term debt Shareholders' Equity Common stock, $10 par value $100,000 Retained earnings Total shareholders' equity Total liabilities and shareholders 257,842 $ 357,842 equity $2,502,992 a. Perform a Du Pont analysis on Green Valley. Assume that the industry average ratios are as follows: Total margin 3.5% Total asset turnover 1.5 Equity multiplier 2.5 Return on equity (ROE) 13.1% b. Calculate and interpret the following ratios: Industry Average Return on assets (ROA) 5.2% Current ratio 2.0 Days cash on hand Average collection period 22 days 19 days Debt ratio 71% Debt-to-equity ratio 2.5 Times interest earned (TIE) ratio 2.6 Fixed asset turnover ratio 1.4 c. Assume that there are 10,000 shares of Green Valley's stock outstanding and that some recently sold for $45 per share. What is the firm's price/earnings ratio? What is its market/book ratio? (Hint: These ratios are discussed in the supplement to this chapter.) Green Valley Nursing Home, Inc., Statement of Income and Retained Earnings, Year Ended December 31, 2015 Revenue Net patient service revenue $3,163,258 106,146 $3,269,404 Other revenue Total revenues xpenses: Salaries and benefits $1,515,438 Medical supplies and drugs 966,781 296,357 Insurance Provision for bad debts 110,000 Depreciation 85,000 206,780 $3,180,356 89,048 Interest Total expenses Operating income Provision for income taxes 31,167 57,881 Net income $ 199,961 $ 257,842 Retained carnings, beginning of year Retained earnings, end of year Green Valley Nursing Home, Inc., Balance Sheet, December 31, 2015 Assets Current Assets $105,737 Cash Marketable securities 200,000 Net patient accounts receivable 215,600 Supplies 87,655 $ 608,992 Total current assets $2,250,000 Property and equipment Less accumulated depreciation Net property and equipment 356,000 $1,894,000 $2,502,992 Total assets (continued) (continued from previous page) Liabilities and Shareholders Equity Current Liabilities: Accounts payable 72,250 Accrued expenses 192,900 Notes payable 100,000 80,000 S 445,150 $1,700,000 Current portion of long-term debt Total current liabilities Long-term debt Shareholders' Equity Common stock, $10 par value $100,000 Retained earnings Total shareholders' equity Total liabilities and shareholders 257,842 $ 357,842 equity $2,502,992 a. Perform a Du Pont analysis on Green Valley. Assume that the industry average ratios are as follows: Total margin 3.5% Total asset turnover 1.5 Equity multiplier 2.5 Return on equity (ROE) 13.1% b. Calculate and interpret the following ratios: Industry Average Return on assets (ROA) 5.2% Current ratio 2.0 Days cash on hand Average collection period 22 days 19 days Debt ratio 71% Debt-to-equity ratio 2.5 Times interest earned (TIE) ratio 2.6 Fixed asset turnover ratio 1.4 c. Assume that there are 10,000 shares of Green Valley's stock outstanding and that some recently sold for $45 per share. What is the firm's price/earnings ratio? What is its market/book ratio? (Hint: These ratios are discussed in the supplement to this chapter.)