Question 17.5B

17.5 Consider the following financial statements for Green Valley Nursing Home, Inc., a for-profit, long-term care facility: Chapter 17: Financial Condition Analysis Valley Nursing Home, Inc., Statement and Retained Earnings, Year Ended of Income December 31, 2015 Revenue: Net patient service revenue Other revenue Total revenues Expenses: Salaries and benefits Medical supplies and drugs Insurance Provision for bad debts Depreciation Interest Total expenses Operating income Provision for income taxes Net income $3,163,258 106,146 $3,269 404 $1,515,438 966,781 296,357 11 0,000 85,000 206 S 89,048 $ 57,881 $3,180,356 31,167 Retained earnings, beginning of year s 199 961 257.842 Retained earnings, end of year Green Valley Nursing Home, Inc., Balance Sheet, December 31, 2015 Assets Current Assets: Cash Marketable securities Net patient accounts receivable Supplies Total current assets Property and equipment Less accumulated depreciation Net property and equipment Total assets S 105,737 200,000 215,600 87,655 S 608,992 $2,250,000 356,000 $1,894,000 $2,502,992 (continued) care Finance (continued from previous page Liabilities and Shareholders Equity Current Liabiliti Accounts payable Accrued expenses Notes payable Current portion of long-term debt Total current liabilities Long-term debt Shareholders' Equity: Common stock, $10 par valuc es: S 72,250 192,900 100,000 S 445,150 S1.700,000 Retained earnings Total shareholders' equity Total liabilities and shareholders s 100,000 257 842 $ 357,842 S2,502992 equity a. Perform a Du Pont analysis on Gireen Valley. Assume that t t the industry average ratios are as follows: Total margin Total asset turnover Equity multiplier Return on equity (ROE) 3.5% 2.5 13.1% b. Calculate and interpret the following ratios: Industry Average Return on assets (ROA) Current ratio Days cash on hand Average collection period Debt ratio Debt-to-equity ratio 5.2% 2.0 22 days 19 days 71% 2.5 Times interest earned (TIE) ratio2.6 Fixed asset turnover ratio 1.4