Health Plans is a Health Maintenance Organization (HMO). Its Statement of Cash Flows is included in the Excel file 'Exam 3 Support'. a) Interpret Chesapeake Health Plans statement of cash flows for 2013. What information does it provide regarding the HMO's sources and uses of cash over the past year? Identify and interepret at least 5 pieces of information. (10 points) b) Compute the following ratios for 2015 and 2014. Interpret relative to historical data and industry average. i. Total Margin (5 points) ii. Return on Assets (5 points) iii. Return on Equity (5 points) c) Complete a DuPont analysis for 2015 and 2014, interpret each ratio independently and in comparison to the industry average.. What does this analysis tell you? (10 points) Health Plans (HMO) 2013 Statement of Cash Flows ($000s) Cash Flows from Operations Income from operations Depreciation expense Increase in premiums receivable Increase in medical costs payable Increase in payables/accruals Net cash flow from operations $20.7 $5.0 ($3.7) $3.9 $1.9 $27.8 Cash Flows from Investing Fixed asset acquisitions ($6.7) Cash Flow from Financing Increase in marketable securities Decrease in long-term debt Net cash flow from financing ($18.2) ($12.9) ($31.1) Net increase (decrease) in cash Beginning cash Ending cash ($10.0) $37.2 $27.2 Industry Averages Health Plans (HMO) Income Statement ($000s) TM 5.00% ROA 4.80% 2015 2014 ROE 58.90% 3.65 Premiums earned Total Asset Turnover Equity Multiplier 3.23 Coinsurance Interest and other income Total revenue $27,68 $22,50 2 0 $689 $500 $242 $100 $28,61 $23,10 3 0 Provider costs Drugs/other medical supplies Administrative services Provision for bad debt Depreciation $16,15 $13,32 4 8 $8,507 $5,988 $3,963 $2,463 $19 $20 $367 $336 Interest expense Total expenses $385 $29,39 5 $375 $22,51 0 Net income ($782) $590 Health Plans (HMO) Balance Sheet ($000s) 2015 2014 Cash and equivalents Premiums receivable Supplies Total current assets Property and equipment, net Total assets $2,937 $1,021 $818 $767 $190 $184 $3,945 $1,972 $5,924 $5,797 $9,869 $7,769 Accounts payable Accrued expenses Notes payable Current portion of long-term debt Total current liabilities Long-term debt Net assets (equity) Total liabilities and equity $2,245 $1,471 $829 $661 $141 $246 $241 $109 $3,456 $2,487 $4,295 $2,382 $2,118 $2,900 $9,869 $7,769 Health Plans (HMO) 2015 Statement of Cash Flows ($000s) 2015 ($782) Cash flows from operating activities Change in net assets (net income) Adjustments: Depreciation Increase in receivables Increase in inventories Increase in accounts payable Increase in accruals $367 ($51) ($6) $774 $168 Net flow from operations $470 Cash flows from investing activities Investment implant and equipment ($494) Cash flows from financing activities Repayment of notes payable Change in current portion of LT debt Increase in LT debt Net cash flow from financing ($105) $132 $1,913 $1,940 Net increase (decrease) in cash $1,916 Beginning cash and equivalents $1,021 Ending cash and equivalents $2,937 Health Plans is a Health Maintenance Organization (HMO). Its Statement of Cash Flows is included in the Excel file 'Exam 3 Support'. a) Interpret Chesapeake Health Plans statement of cash flows for 2013. What information does it provide regarding the HMO's sources and uses of cash over the past year? Identify and interepret at least 5 pieces of information. (10 points) b) Compute the following ratios for 2015 and 2014. Interpret relative to historical data and industry average. i. Total Margin (5 points) ii. Return on Assets (5 points) iii. Return on Equity (5 points) c) Complete a DuPont analysis for 2015 and 2014, interpret each ratio independently and in comparison to the industry average.. What does this analysis tell you? (10 points) Health Plans (HMO) 2013 Statement of Cash Flows ($000s) Cash Flows from Operations Income from operations Depreciation expense Increase in premiums receivable Increase in medical costs payable Increase in payables/accruals Net cash flow from operations $20.7 $5.0 ($3.7) $3.9 $1.9 $27.8 Cash Flows from Investing Fixed asset acquisitions ($6.7) Cash Flow from Financing Increase in marketable securities Decrease in long-term debt Net cash flow from financing ($18.2) ($12.9) ($31.1) Net increase (decrease) in cash Beginning cash Ending cash ($10.0) $37.2 $27.2 Industry Averages Health Plans (HMO) Income Statement ($000s) TM 5.00% ROA 4.80% 2015 2014 ROE 58.90% 3.65 Premiums earned Total Asset Turnover Equity Multiplier 3.23 Coinsurance Interest and other income Total revenue $27,68 $22,50 2 0 $689 $500 $242 $100 $28,61 $23,10 3 0 Provider costs Drugs/other medical supplies Administrative services Provision for bad debt Depreciation $16,15 $13,32 4 8 $8,507 $5,988 $3,963 $2,463 $19 $20 $367 $336 Interest expense Total expenses $385 $29,39 5 $375 $22,51 0 Net income ($782) $590 Health Plans (HMO) Balance Sheet ($000s) 2015 2014 Cash and equivalents Premiums receivable Supplies Total current assets Property and equipment, net Total assets $2,937 $1,021 $818 $767 $190 $184 $3,945 $1,972 $5,924 $5,797 $9,869 $7,769 Accounts payable Accrued expenses Notes payable Current portion of long-term debt Total current liabilities Long-term debt Net assets (equity) Total liabilities and equity $2,245 $1,471 $829 $661 $141 $246 $241 $109 $3,456 $2,487 $4,295 $2,382 $2,118 $2,900 $9,869 $7,769 Health Plans (HMO) 2015 Statement of Cash Flows ($000s) 2015 ($782) Cash flows from operating activities Change in net assets (net income) Adjustments: Depreciation Increase in receivables Increase in inventories Increase in accounts payable Increase in accruals $367 ($51) ($6) $774 $168 Net flow from operations $470 Cash flows from investing activities Investment implant and equipment ($494) Cash flows from financing activities Repayment of notes payable Change in current portion of LT debt Increase in LT debt Net cash flow from financing ($105) $132 $1,913 $1,940 Net increase (decrease) in cash $1,916 Beginning cash and equivalents $1,021 Ending cash and equivalents $2,937