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

17.4 Consider the following financial statements for BestCare HMO, 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                $38,613

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                      $2,118

                                           ______

BestCare HMO Balance Sheet, June 30, 2015 (in thousands)

Assets:

Cash and cash equivalents           $2,737

Net premiums receivable            821

Supplies                            387

Total current assets        $3,945

Net Property and equipment      $5,925

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

                                                          _____

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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