Mmha6160 week 3_17.4. bestcare hmo statement of operations and

MMHA6160  Week 3_17.4.

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BestCare HMO

Statement of Operations and Change in Net Assets

Year Ended June 30, 2011

 

Revenue:

                Premiums earned                                                                            $26,682

                Co-insurance                                                                                         1,689

                Interest and other income                                                                  242

                     Total revenue                                                                               $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

 

Net assets, beginning of year                                                                     $    900

 

Net assets, end of year                                                                                 $ 2,118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BestCare HMO

Balance Sheet

June 30, 2011

 

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                                                    7 days

                Debt ratio                                                                                  69%

                Debt-to-equity ratio                                                             2.2

                Times interest earned (TIE) ratio                                   2.8

                Fixed asset turnover ratio                                                  5.2