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    Feb 21, 2012, 02:43 PM
    Du Pont analysis and ratios help!
    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

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