BestCare HMO
Statement of Operations and Change in Net Assets
Year Ended June 30, 2004
(in thousands)

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
556 Healthcare Finance

Net income $ 1,218

Net assets, beginning of year $ 900
Net assets, end of year $ 2,118


BestCare HMO
Balance Sheet
June 30, 2004
(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

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


1. 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- 25.5%

2. Calculate and interpret the following ratios for BestCare:
Industry Average

Return on assets- 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 ratio- 2.8
Fixed asset turnover ratio- 5.2