Statement of Income and Retained Earnings Year Ended December 31, 2011

Revenue: Net patient service revenue $3,163,258 Other revenue 106,146

Total revenue 3,269,404

Expenses: Salaries and benefits $1,515,438 Medical supplies and drugs 966,781 Insurance and other 296,357 Provision for bad debts 110,000 Depreciation 85,000 Interest 206,780 Total expenses $3,180,356

Operating Income $89,048 Provision for income tax 31,167

Net Income $57,881

Retained earnings, beginning of year $199,961

Retained earnings, end of year $257,842

Balance Sheet December 31, 2011

Assets Current assets: Cash $105,737 Marketable securities 200,000 Net patient accounts receivables 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

Please explain the answer and show work.

Perform a Du Pont analysis on the Heart Hospital. Assume that the industry average ration are as follows:

Total margin 3.5%

Total asset turnover 1.5

Equity multiplier 2.5

Return of Equity 13.1%

Calculate and interpret the following ratios for the Heart Hospital

Industry Average

Return of assets 5.2%

Current ratio 2.0

Days of cash on hand 22 days

Average collection period 19 days

Debt ratio 71%

Debt-to-equity ratio 2.5

Times interest earned 2.6

Fixed asset turnover ratio 1.4