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I need help and understanding to answer a). & b). questions can I get a tutor to help? Consider the following financial statements for Best

I need help and understanding to answer a). & b). questions can I get a tutor to help?

Consider the following financial statements for Best Care HMO, a not-for-profit managed care plan:

Best Care HMO

BestCare HMO

Statement of Operations and Change in Net Assets

Balance Sheet

Year Ended June 30, 2011

30-Jun-11

(in thousands)

Revenue:

$2,737

Premiums earned

$26,682

821

Co-insurance

1,689

387

Interest and other income

242

$3,945

$5,924

Total Revenue

$28,613

$9,869

Expenses:

Salaries and benefits

$15,154

Medical supplies and drugs

7,507

Insurance

3,963

$2,145

Provision for bad debts

19

929

Depreciation

367

141

Interest

385

241

$3,456

Total expenses

$27,395

$4,295

$7,751

Net Income

$1,218

$2,118

Net assets, beginning of year

$900

$9,869

Net assets, end of year

$2,118

BestCare HMO

Balance Sheet

30-Jun-11

Assets

Cash and cash equivalents

$2,737

Net premiums receivable

821

Supplies

387

Total current assets

$3,945

Net property and equipment

$5,924

Total assets

$9,869

Liabilities and Net Assets

Accounts payable-medical services

$2,145

Accrued expenses

929

Notes payable

141

Current portion of long-term debt

241

Total current liabilities

$3,456

Long-term debt

$4,295

Total liabilities

$7,751

Net assets (equity)

$2,118

Total liabilities and net assets

$9,869

a. Perform a Du Pont analysis on BestCare. Assume that the industry average ratios are as follows:

Total margin 3.8%

Total asset turnover 2.1%

Equity multiplier 3.2

Return on equity (ROE) 25.5%

b. Calculate and interpret the following ratios for BestCare:

Industry Average

Return on assets (ROA) 8.0%

Current ratio 1.3

Days cash on hand 41 days

Average collection period 07 days

Debt ratio 69%

Debt-to-equity ratio 2.2

Times interest earned (TIE) ratio 2.8

Fixed asset turnover ratio 5.2

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