Question 17.4

rative discussion to identify the applicable ratios.) b. Interpret the ratios. Use both trend and comparative analyses. For the comparative analysis, assume that the industry average data presented in the book are valid for both 2014 and 2015. 17.4 Consider the following financial statements for BestCare HMO, a not-for-profit managed care plan: on ify cial oard? of the BestCare HMO Statement of Operations and Change in Net Assets, Year Ended June 30, 2015 (in thousands) Revenue: Premiums earned $26,682 Coinsurance 1,689 Interest and other income 242 Total revenues $28,613 Expenses: Salaries and benefits $15,154 Medical supplies and drugs 7,507 Insurance 3,963 Provision for bad debts 19 Depreciation 367 Interest 385 Total expenses $27,395 Net income $ 1,218 yable). vhich Net assets, beginning of year Net assets, end of year $ 900 $ 2,118 million margin BestCare HMO Balance Sheet, June 30, 2015 (in thousands) 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 (continued) Healthcare Finance (continued from previous page) Liabilities and Net Assets: Accounts payable--medical services Accrued expenses Notes payable Current portion of long-term debt Total current liabilities Long-term debt Total liabilities Net assets (equity) Total liabilities and net assets $2,145 929 141 241 $3,456 $4,295 $7,751 $2,118 $9,869 a. Perform a Du Pont analysis on BestCare. Assume that the industry average ratios are as follows: 3.8% Total margin Total asset turnover 2.1 Equity multiplier 3.2 Return on equity (ROE) 25.5% b. Calculate and interpret the following ratios for BestCare: Return on assets (ROA) Current ratio Days cash on hand Average collection period Debt ratio Debt-to-equity ratio Times interest earned (TIE) ratio Fixed asset turnover ratio Industry Average 8.0% 1.3 41 days 7 days 69% 2.2 2.8 5.2 17.5 Consider the following financial statemente forman Yolley