Application: Week 2 Numerical Problems
1. Problem 3.5 form page 106, Chapter 3
a. Brandywine’s 2001 income statement:
December 31, 2011.
Statement of income
Expenses: (expenses - $9,000,000)+(depreciation - $1,500,000): total expenses: $10,500,000
Net income: $1,500,000
b. Net income, total profit margin, and cash flow
Net income: total revenues – total expenses: $1,500,000
Total profit margin: [net income / revenues] *100 = $12.5
Cash flow: net income + depreciation: $3,000,000
c. How changes affect if depreciating value doubles:
Now depreciating ...view middle of the document...
Problem 4.5 form page 141, Chapter 4
a. The balanced sheet differs from the one presented in Exhibit 4.1 for Sunnyvale due to difference in the cases of total assets, total liabilities, and debt ratio. The values of assets and liabilities for BestCare HMO is showing less values than does of Sunnyvale Clinic. The assets and long term investment of Sunnyvale is showing more resources. And the liabilities and equity values for Sunnyvale is having more financial resources and values.
b. BestCare HMO net working capital for 2011: total current assets – total current liabilities = $3,945 - $3,456 = $489
c. BestCare HMO debt ratio: total liabilities / total assets = $7,751 / $9,869 = 0.78%. Comparing this with the debt ration of Sunnyvale which was 1% this means that BestCare HMO have less debt ration than Sunnyvale Clinic.
3. Problem 4.6 form page 142, Chapter 4
a. Difference between this exhibit and the ones in 4.1 and 4.5 is that the balance sheet form Green Valley Nursing Home, Inc is having high amount of total assets, liabilities, and long terms investments than the other two homes.
b. Green Valley’s net working capital for 2011: total current assets – total current liabilities = $608,992 - $445,150 = $163,842
c. Green Valley’s debt ratio: total liabilities / total assets = $2,502,992 / $2,502,992 = 1%. This debt ratio is equal to the one for Sunnyvale and greater than the one of BestCare.
Gapenski, C. L. (2012). Healthcare Finance (5th ed.). Chicago, Illinois : Health Administration Press. pp 106, 141, 142.