00 B D E Assigned Problem 2 Consider the following financial statements for BestCare HMO, a not-for-profit managed care plan: BestCare HMO Statement of Operations and Change in Net Assets Year Ended June 30, 2016 (in thousands) Revenue: 3 Premiums earned $26,682 4 Coinsurance $1,689 5 Interest and other income $242 6 Total revenue $28,613 17 Expenses: 18 Salaries and benefits $15,154 19 Medical supplies and drugs $7,507 20 Insurance $3,963 21 Rent $19 22 Depreciation S367 23 Interest $385 24 Total expenses $27,395 25 Net income $1,218 26 Net assets, beginning of year 5900 27 Net assets, end of year $2,118 28 29 BestCare HMO 30 Balance Sheet 31 Year Ended June 30, 2016 32 (in thousands) 33 Assets 34 Cash and cash equivalents $2,737 35 Net premiums receivable 5821 36 Supplies 5387 37 Total current assets $3,945 38 Net property and equipment $5,924 Assigned Problem 1 Assigned Problem 2 Calestation Mode: Automatic Workbook statistics Assigned Problem 3 + Total current assets $3,945 Net property and equipment $5,924 Total assets $9,869 D 1 Liabilities and Net Assets 2 Accounts payable - medical services $2,145 3 Accrued expenses $929 14 Notes payable $141 A5 Current portion of long-term debt $241 46 Total current liabilities $3,456 47 Long-term debt $4,295 48 Total liabilities $7,751 49 Net assets (equity) $2,118 50 Total liabilities and net assets $9,869 51 52 a. Perform a Du Pont analysis on BestCare. Assume that the industry average ratios are as follows: 53 Total margin 3.8% 54 Total asset turnover 2.1 55 Equity multiplier 3.2 56 Return on equity (ROE) 25.5% 57 b. Calculate and interpret the following ratios for BestCare: 58 Industry average 59 Return on assets (ROA) 8.0% 60 Current ratio 1.3 61 Days cash on hand 62 Average collection period 63 Debt ratio 69% 64 Debt-to-equity ratio 2.2 65 Times interest earned (TIE) ratio 2.8 66 Fixed asset turnover ratio 5.2 67 68 ANSWER 69 70 ROE Total margin X Total asset turnover X Equity multiplier 71 Net income Net Income X Total revenue X Total assets 41 days 7 days H ) 5.2 Total asset turnover X Total revenue X Total assets Equity multiplier Total assets Total equity 2.1 3.2 E TRUE WWW 5 Fixed asset turnover ratio 7 8 ANSWER -9 a. 20 ROE Total margin X 21 Net incom Net incom 72 Total equity Total revenue 73 74 BestCare 75 76 77 78 Industry 25.5% 3.8% 79 80 81 82 83 84 85 b. 86 Return on assets - 87 Current ratio = 88 Days cash on hand - 89 90 Average collection period 91 92 Debt ratio- 93 Debt to equity ratio = 94 TIE ratio- 95 Fixed asset turnover - 96 97 98 99 100 BestCare Industry 8.0% 1.3 41 days 7 days 69% 2.2 2.8 5.2