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    State of Operation

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    Consider the following financial statements for BestCare HMO, a not-for-profit managed care plan:

    BestCare HMO
    Statement of Operation and Change in Net Assets
    Year Ended June 30, 2007
    (in thousand)

    Revenue:
    Premiums earned $26,682.00
    Co-insurance $ 1,689.00
    Interest and other income $ 242.00
    Total revenue $28,613.00
    Expenses:
    Salaries and benefits $15,154.00
    Medical supplies and drugs $ 7,507.00
    Insurance $ 3,963.00
    Provision for bad debts $ 19.00
    Depreciation $ 367.00
    Interest $ 385.00
    Total expenses $27,395.00
    Net income $ 1,218.00
    Net assets, beginning of year $ 900.00
    Net assets, end of year $ 2,118.00

    _____________________________________________________________________________
    BestCare HMO
    Balance Sheet
    June 30, 2007
    (in thousands)

    Assets
    Cash and cash equivalents $ 2,737.00
    Net premiums receivable $ 821.00
    Supplies $ 387.00
    Total current assets $ 3,945.00
    Net property and equipment $ 5,924.00
    Total assets $ 9,869.00

    Liabilities and Net Assets
    Accounts payable-medical services $ 2,145.00
    Accrued expenses $ 929.00
    Notes payable $ 141.00
    Current portion of long-term debt $ 241.00
    Total current liabilities $ 3,456.00
    Long -term debt $ 4,295.00
    Total liabilities $ 7,751.00
    Net assets (equity) $ 2,118.00
    Total liabilities and net assets $ 9,869.00

    a. Perform a Du Pont analysis on BestCare HMO. 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%
    b. Calculate and interpret the following ratios for BestCare:

    Industry Average
    Return on assets (ROA) 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 (TIE) ratio 2.8
    Fixed asset turnover ratio 5.2

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    https://brainmass.com/business/project-management/state-operation-478957

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    Solution Summary

    State of operations are examined for BestCare HMO.

    $2.19

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