Healthy Body Nursing Home, Inc. Statement of Income and Retained Earnings Year Ended December 31, 2020

Revenue:

Resident services revenue: $3,163,258

Provision for bad debts: 110,000

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

Retained earnings, beginning of year: $ 199,961

Retained earnings, end of year: $ 257,842

Healthy Body Nursing Home, Inc. Balance Sheet December 31, 2020 ASSETS

Current assets: Cash: $105,737

Short-term securities: 200,000

Net accounts receivable: 215,600

Supplies: 87,655

Total current assets: $ 608,992

Property and equipment: 2,250,000

Less: Accumulated depreciation: 356,000

Net property and equipment: $ 1,894,000

Total assets: $ 2,502,992

LIABILITIES AND SHAREHOLDERS EQUITY Current 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

Shareholders equity

Common stock, $10 par value: $ 100,000

Retained earnings: 257,842

Total shareholders equity: $ 357,842

Total liabilities and shareholders equity: $ 2,502,992

1. Perform a DuPont analysis on Healthy Body Nursing Home, Inc. Be sure to show your work. Assume that the industry average ratios are as follows (10 points possible): - Total margin: 3.5% Total asset turnover: 1.5 o Equity multiplier: 2.5 - Return on equity: 13.1% 2. Calculate and interpret the following ratios. Respond to the following questions. Be sure to show your work. Industry averages have been listed next to each ratio (3 points for each ratio calculation; 24 points total): o Return on assets: 5.2% o Current ratio: 2.0 Days cash on hand: 22 days Average collection period: 19 days o Debt ratio: 71% Debt-to-equity ratio: 2.5 . Tirnes interest earned ratio: 2.6 . Fixed-asset turnover ratio: 1.4