Question

How do you perform a Du Point analysis given average ratios. This question comes from 17.4 of the book. Healthcare finance how do I get started

17.4 Consider the following financial statements for BestCare HMPO, 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 $26,682 Coinsurance 1,689 Interest and other income 242 Total revenues $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 Net income $1.218 - Net assets, beginning of year Net assets, end of year $900 $2.118 $2,737 821 387 $3.945 $5,924 $9.869 BestCare HMO Balance Sheet, June 30, 2015 in thousands) Assets: Cash and cash equivalents Net premiums receivable Supplies Total current assets Net property and equipment Total assets 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

Answer 1

(a) Dupont Analysis wie Roe = Profit margin x Auset Drun over x Equity multiplies from 3 3.8x2.1X3.2 2 25. the geven data Returs On Equity = 25.5 proved. ... ROE = Profit margen & Asset d.ox Equity multiplies 25.5 = 95.5 Hence

(6 Ratios for Best Care: ROA= Net Income Average Total Aussels e $1,218 ( Average 2.8 total asseli I 900t 0118 $1509 ] $1509 comment :- ROA Ratio satisfies the Andustry Aug ralio D Current Ratio : current assete $3945 Comment : current Liabilities - $3,456 = 1.14 current Ratio in less than Clow the Industry Average ratio. it does not meet the Industry norms because it in less than the Industry now industy rate ② Days Cash On hand: - Cash on hand (operating eup- Non Cash Exp)/365 $2,737 Operating Eup = Salaries +medical treg 7 (26624 - 367/365 $ 2,937 - 71.93 38.05 = 15154 + 7507 +3963 = 26624 : Non cash oup = Seprecalep

O 360p Comment :- days Cash on hand for best care in 3805 & Industry Average in ul days. aso it que meet industry Average. (6) Average collection period :- = 365 days Aug. Receivable Rusoves Ratio Aug. Receivable Turnover Ratio = Net Credit Bales. Avg. auoinlo creceivable. $26,682, 3.2.49 $ 821 ACP é 365days a 11.09 32.49 days Comment: - Arg. Collection period for Best Care in 11.09 days as pes industry Aug in days. In this case Best Care does not meet the criteria 5) welt Ratio Total Liabilities - $7.751 Total Ausete $9,869 Comment :- = .78 278% Next Ratio for Best Care in 486. As ner

Industry Average it in 69% in this case Best care doesnt meet the industry Average © belot. toEquity ralio :- Total Liabilities $7,751 Total Equity $1/8 = 3.66 Comment :- Delt to equity cratio ip lest care ar (3.66 is more than more than Industry Industry Ava C. elu.D. Aug Ci. e) 2.2. So it meets the Creteria 7 TIE Ratio :- КВІТ = Ist Eupense where EBIT in Inetas come + Interest + tanes] = $1218 + 386 e 1608 4.16 $ 1603 $385 Comment : more the Care in it meets Best so than the Creteria Ratio for Average. THE industry

) fined asset Purnous ratio : com Net sales 28613 fined assete =4.88 $5924 - PAT. Ratio for Best Care in Industry rate. so it doesnot Creteria. less meet than the