Section 1

To start out, I would like you to think about the financial characteristics of each line of business (retail pharmacy, acute care hospitals, health insurance). Jot down a few characteristics you would expect to differ for each business line and a metric you could use to measure each characteristic.

Section 2

This section asks about how you would expect certain financial characteristics to differ for firms in the pharmacy, hospital and health insurance industries. For each question, include a brief (roughly 1-2 sentence) justification for your answer.

1. How would you expect the mix of assets required for each industry to differ? In particular:

1. Which of the three companies (hospital chain, pharmacy chain, health insurer) would you expect to hold the largest proportion of their assets as inventory?
2. Which of the three companies (hospital, pharmacy, insurance) would you expect to hold the largest proportion of their assets as facilities and equipment?
3. Which of the three companies (hospital, pharmacy, insurance) would you expect to hold the largest proportion of their assets as cash and short-term investments?

2. Which of the three companies (hospital chain, pharmacy chain, health insurer) would you expect to have investment income?
3. Which of the three companies (hospital, pharmacy, insurance) would you expect to have the highest total margin?
4. Which of the three companies (hospital, pharmacy, insurance) would you expect to collect payments from customers most rapidly? Which would you expect to take the longest to collect payments due?

Section 3

This section asks you to compute measures of the financial characteristics I asked you about in the previous section.

5. The next several questions require you to look at different ways of measuring the mix of assets each company holds.

1. Which company (A, B or C) has the largest amount of inventory? What is the value of the inventory? A related and perhaps more telling question is, which company has the largest percentage of its total assets held in inventory?
2. Which company (A, B or C) holds the greatest proportion of its total assets as facilities, equipment and other fixed assets?
3. How many days cash on hand does each company (A, B and C) hold? (Note: for the expenses number in this calculation, include all accounts listed under total revenue on the companies income statements.)

6. Which company (A, B or C) has the largest investment income? How much was investment income as a percent of total revenue? What was the dollar amount?
7. What are the total margins for companies A, B and C?
8. Which company (A, B or C) has the greatest number of days in patient accounts receivable? Which has the fewest?

Section 4

Based on your answers to the questions in Sections 2 and 3:

- Is Company A a retail pharmacy chain, a health insurer or a hospital chain?

- Is Company B a retail pharmacy chain, a health insurer or a hospital chain?

- Is Company C a retail pharmacy chain, a health insurer or a hospital chain?

Write a brief explanation (3-4 sentences) justifying each answer.

Company A Company B Company C Consolidated Balance Sheets - USD ($) $ in Millions 2015 Consolidated Balance Sheets - USD ($) $ in Millions 2015 Consolidated Balance Sheets - USD ($) $ in Millions 2015 Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net $ 124 $0 1,601 $ 10,923 1,988 6,523 $ 356 $ 0 2,704 2,697 128 4,550 0 2,255 Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net of allowances of $333 and $260 Inventories Prepaid expenses and other current assets Total current assets Long-term investments Property, plant and equipment, net of accumulated depreciation Other assets Total assets Liabilities Current liabilities: Medical costs payable Current maturities of long-term debt 12,205 31,639 18,792 4,861 Inventories Prepaid expenses and other current assets Total current assets Long-term investments Property, plant and equipment, net of accumulated depreciation Other assets Total assets Liabilities Current liabilities: Medical costs payable Current maturities of long-term debt and lease financing obligations Accounts payable Accrued salaries, wages and other current liabilities Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, less allowance for doubtful accounts of $887 Inventories Prepaid expenses and other current assets Total current assets Long-term investments Property, plant and equipment, net of accumulated depreciation Other assets Total assets Liabilities Current liabilities: Medical costs payable Current portion of long-term debt 309 1,802 5,171 1,175 7,915 4,472 11,277 56,091 111,383 9,421 23,682 0 14,330 6,634 127 1,543 1,427 Accounts payable Accrued salaries, wages and other current liabilities 11,994 9,940 1,380 2,801 Accounts payable Accrued salaries, wages and other current liabilities Total current liabilities Long-term debt, net of current portion Lease financing obligations, less current maturities Total current liabilities Long-term debt, less current maturities Lease financing obligations, less current maturities 2,997 6,914 Total current liabilities Long-term debt, less current maturities Lease financing obligations, less current maturities 42,898 25,460 4,308 14,383 53 Other noncurrent liabilities Total liabilities Stockholders' equity: Total liabilities and stockholders' equity 732 $ 10,696 581 $ 11,277 Other noncurrent liabilities Total liabilities Stockholders' equity: Total liabilities and stockholders' equity 7,564 75,922 35,461 $ 111,383 Other long-term liabilities Total liabilities Shareholders' equity: Total liabilities and equity 1,767 $ 20,458 3,224 $ 23,682 Instructor notes: 1. It isn't likely Company B has no assets in inventory. It is more likely that inventory is such a small part of this companies assets that inventories were included in the "Other assets" account. I added several accounts to each set of financials to make them easier to help standardize them in an attempt to make them easier to digest. 2015 Compnay Consolidated Statements of Operations - USD $.$innillions Revernes 2015 2015 $30,737 156,397 $ 18,733 710 157,107 16,216 $0 30,737 22,910 6,504 509 48 450 (37) 113 166 Investment and other income Total revernes Cost of products sold Medical and other operating costs Depreciation Lease termination and charges Interest expense Income tax expense Net earnings Company Consolidated Statements of Operations - USD ($). $innillions Net operating reverwies (net of 1,477 provision for doubtful accounts) Investment and other income Total revenues Salaries, wages and benefits Supplies Other operating expenses, net Depreciation expense Other non-operating expenses Interest expense Income tax expense (benefit) Net income (loss) 128,187 1,693 $0 18,733 9,011 2,963 4,483 797 3 912 68 76 290 4,363 5,868 Company A Company B Company C Consolidated Balance Sheets - USD ($) $ in Millions 2015 Consolidated Balance Sheets - USD ($) $ in Millions 2015 Consolidated Balance Sheets - USD ($) $ in Millions 2015 Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net $ 124 $0 1,601 $ 10,923 1,988 6,523 $ 356 $ 0 2,704 2,697 128 4,550 0 2,255 Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net of allowances of $333 and $260 Inventories Prepaid expenses and other current assets Total current assets Long-term investments Property, plant and equipment, net of accumulated depreciation Other assets Total assets Liabilities Current liabilities: Medical costs payable Current maturities of long-term debt 12,205 31,639 18,792 4,861 Inventories Prepaid expenses and other current assets Total current assets Long-term investments Property, plant and equipment, net of accumulated depreciation Other assets Total assets Liabilities Current liabilities: Medical costs payable Current maturities of long-term debt and lease financing obligations Accounts payable Accrued salaries, wages and other current liabilities Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, less allowance for doubtful accounts of $887 Inventories Prepaid expenses and other current assets Total current assets Long-term investments Property, plant and equipment, net of accumulated depreciation Other assets Total assets Liabilities Current liabilities: Medical costs payable Current portion of long-term debt 309 1,802 5,171 1,175 7,915 4,472 11,277 56,091 111,383 9,421 23,682 0 14,330 6,634 127 1,543 1,427 Accounts payable Accrued salaries, wages and other current liabilities 11,994 9,940 1,380 2,801 Accounts payable Accrued salaries, wages and other current liabilities Total current liabilities Long-term debt, net of current portion Lease financing obligations, less current maturities Total current liabilities Long-term debt, less current maturities Lease financing obligations, less current maturities 2,997 6,914 Total current liabilities Long-term debt, less current maturities Lease financing obligations, less current maturities 42,898 25,460 4,308 14,383 53 Other noncurrent liabilities Total liabilities Stockholders' equity: Total liabilities and stockholders' equity 732 $ 10,696 581 $ 11,277 Other noncurrent liabilities Total liabilities Stockholders' equity: Total liabilities and stockholders' equity 7,564 75,922 35,461 $ 111,383 Other long-term liabilities Total liabilities Shareholders' equity: Total liabilities and equity 1,767 $ 20,458 3,224 $ 23,682 Instructor notes: 1. It isn't likely Company B has no assets in inventory. It is more likely that inventory is such a small part of this companies assets that inventories were included in the "Other assets" account. I added several accounts to each set of financials to make them easier to help standardize them in an attempt to make them easier to digest. 2015 Compnay Consolidated Statements of Operations - USD $.$innillions Revernes 2015 2015 $30,737 156,397 $ 18,733 710 157,107 16,216 $0 30,737 22,910 6,504 509 48 450 (37) 113 166 Investment and other income Total revernes Cost of products sold Medical and other operating costs Depreciation Lease termination and charges Interest expense Income tax expense Net earnings Company Consolidated Statements of Operations - USD ($). $innillions Net operating reverwies (net of 1,477 provision for doubtful accounts) Investment and other income Total revenues Salaries, wages and benefits Supplies Other operating expenses, net Depreciation expense Other non-operating expenses Interest expense Income tax expense (benefit) Net income (loss) 128,187 1,693 $0 18,733 9,011 2,963 4,483 797 3 912 68 76 290 4,363 5,868