Question

data presented in esented in the core valid for both 2014 and 2015. the following financial statements for BestCare HMO, a 174 Consider the for profit managed care plan Care HMO Statement of Operations and Change in Not Aucts, Year Ended June 30, 2015 in thousands $26,682 1.689 242 $28,613 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 $15,154 7 507 3.963 19 367 385 $27,395 $ 1218 Net assets, beginning of year Net assets, end of year $ 900 52.118 BestCare HMO Balance Shect, June 30, 2015 in thousands $2,737 821 387 Assets: Cash and cash equivalents Net premiums receivable Supplies Total current assets Net property and equipment Total assets $3.945 $5.924 59.869 continued

How do I solve for b?

Answer 1

1: Return on Assets - Net income / Total Assets

Calculation: 1218/ 9869 = 12.34%

2: Current Ratio - Current Assets/ Current Liabilities

Calculation: 3945/ 3456 = 1.14

3: Days cash on hand - Total Cash in hand/ Cash expenses

Cash Expenses = Total Expenses - Depreciation / 365 = (27395 - 367) / 365 = 74.05

Days cash on hand = 2737/ 74.05 = 36.97 days

4: Average Collection period - Premiums receivable divided by Total Premiums x 365

Calculation: 821/ 26682 x 365 = 11.07 days

5: Debt Ratio: Total Liabilities/ Total Assets

Calculation: 7751/ 9869 = 78.53%

6: Debt to equity ratio: Long Term Debt/ Total Equity

Calculation: 4295 / 2118 = 2.02

7: Times Interest earned: EBIT/ Total Interest

Calculation: (1218 + 385)/ 385 = 4.16

8: Fixed Asset Turnover: Turnover/ Property and equipment

Calculation: 28613/ 5924 = 4.83

The above 8 factors can be compared with the industry to understand if the company is better performing than the industry or not.