MMHA6160 Week 3_17.4.
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
