MMHA6160 Week 3 Assignment Paper
MMHA6160 Week 3 Assignment Paper
17.4 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, 2015 (in thousands) Revenue: Premiums earned Coinsurance Interest and other income Total revenues Expenses: Salaries and benefits Medical supplies and drugs Insurance Provision for bad debts Depreciation Interest Total expenses Net income Net assets, beginning of year Net assets, end of year $26,682 1,689 242 $28,613 $15,154 7,507 3,963 19 367 385 $27,395 $ 1,218 $ 900 $ 2,118 BestCare HMO Balance Sheet, June 30, 2015 (in thousands) 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 (continued)
Liabilities and Net Assets: Accounts payable—medical services Accrued expenses Notes payable Current portion of long-term debt Total current liabilities Long-term debt Total liabilities Net assets (equity) Total liabilities and net assets $2,145 929 141 241 $3,456 $4,295 $7,751 $2,118 $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: Return on assets (ROA) Current ratio Days cash on hand Average collection period Debt ratio Debt-to-equity ratio Times interest earned (TIE) ratio Fixed asset turnover ratio Industry Average 8.0% 1.3 41 days 7 days 69% 2.2 2.8 5.2
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