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Consider the following financial statements for BestCare HMO




Question;17.4 Consider the following financial statements for BestCare HMO, a not-for-profit managed care plan:BestCare HMOStatement of Operations and Change in Net AssetsYear Ended June 30, 2011(in thousands)Revenue:Premiums earned $26,682Coinsurance $1,689Interest and other income $242Total revenue $28,613Expenses:Salaries and benefits $15,154Medical supplies and drugs $7,507Insurance $3,963Provision for bad debts $19Depreciation $367Interest $385Total expenses $27,395Net income $1,218Net assets, beginning of year $900Net assets, end of year $2,118BestCare HMOBalance SheetYear Ended June 30, 2011(in thousands)AssetsCash and cash equivalents $2,737Net premiums receivable $821Supplies $387Total current assets $3,945Net property and equipment $5,924Total assets $9,869Liabilities and Net AssetsAccounts payable - medical services $2,145Accrued expenses $929Notes payable $141Current portion of long-term debt $241Total current liabilities $3,456Long-term debt $4,295Total liabilities $7,751Net assets - unrestricted (equity) $2,118Total liabilities and net assets $9,869a. Perform a Du Pont analysis on BestCare. Assume that the industry average ratios are as follows:Total margin 3.8%Total asset turnover 2.1Equity multiplier 3.2Return on equity (ROE) 25.5%b. Calculate and interpret the following ratios for BestCare:Industry averageReturn on assets (ROA) 8.0%Current ratio 1.3Days cash on hand 41 daysAverage collection period 7 daysDebt ratio 69%Debt-to-equity ratio 2.2Times interest earned (TIE) ratio 2.8Fixed asset turnover ratio 5.2


Paper#47700 | Written in 18-Jul-2015

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