Question

Based on the material in the financial reports below for the HMO, fill in the yellow boxes (2 points each, 14 points total) and answer the questions below:

a.What is the value of profitability for ABC as compared to the Industry Averages? (15 points)

b.What can you tell in regard to the ROE in terms of industry averages? (15 points)

c.What assumptions can you make in regard to the liquidity ratios? (15 points)

d.What assumptions can you make in regard to the utilization of assets? (15 points)

e.Overall, how ABC doing as compared to the industry average?

(16 points)

Balance Sheet for ABC HMO:

Current Assets

Cash and Short-Term Investments

$17,879

Net accounts receivable

$7,894

Inventory

$0

Other Current Assets

$13,980

Total Current Assets

a)

Net Fixed Assets

$ 13,589

Long-Term Investments

$19,245

Goodwill and Other Intangibles

$4,300

Other Assets

$4,325

Total Assets

b)

Liabilities and Equity

Total current liabilities

$33,875

Long-Term debt

$31,982

Other Liabilities

$ 8,451

c)Equity ?

d)Total Equity and Liabilities ?

Income Statement Data

$179,875

Expenses

Depreciation & amortization

$2,140

Other operating expense

$163,889

Total operating expense

e)

Interest expense

$567

Net income before taxes?

f)

Income tax

$5.432

c)vNet Income After Tax ?

c)

ABC's HMO's Financial Ratio Analysis

Financial Ratio

ABC

Industry Average

Liquidity

Days in receivable

23

35

Days cash onhand

93

123

Capital Structure

Debt financing %%

74.5%

34.5%

Long-term debt to capital %

48.3%

43.5%

Cash flow to debt %

9.1%

14.3%

Activity

Fixed Asset Turnover

39.5

64.3

Total Asset Turnover

1.6

1.5

Profitability

ROE%

18.1%

16.2%

Total Margin

4.0%

4.2%

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