1. According to the Statement of Cash Flows, Chesapeake has a positive cash flow from operations in the amount of $27.8 million in 2009. Moreover, there is a negative cash flow from investing and financing activities in the amounts of -$6.7 million and -$31.1 million, respectively. Chesapeake invested $6.7 million in fixed asset acquisitions. However, Chesapeake still has an overall positive cash flow in the amount of $27.2 million. Although this amount is $10 million lower than the last fiscal year (2008), this should not be too much of a concern at this time because $10 million was used to pay down long-term debt. Overall the main ...view middle of the document...
This shows that there is an upward trend in total profit margin and that the MCO has been improving in expense control and performing above the national average. However, among its competitors, Chesapeake can do better.
TOTAL ASSET TURNOVER:
The total asset turnover has remained the same (2.8) from 2008 to 2009. The ratio is below the national median of 3.1. Thus, Chesapeake may have some difficulty generating revenue from its assets when compared to other managed care companies- poor utilization of assets.
RETURN ON ASSETS:
ROA increased from 10.21% in 2008 to 16.27% in 2009. Chesapeake’s ROA is higher than the industry average of 8.99%, meaning it has above return on assets, mainly due to its good expense control. This is good for Chesapeake because it shows that they can generate a high return on the company’s investments and assets.
In 2008 and 2009, Chesapeake was below the national average decreasing from 3.13 to 2.23 indicating lower debt utilization than the industry average. This is a good sign because it shows that the organization is relying less on debt to finance its asset base.
RETURN ON EQUITY:
ROE increased from 31.96% in 2008 to 36.32% in 2009. In 2008 and 2009 respectively, Chesapeake was able to generate 31.96 cents and 36.32 cents of income for each dollar of equity investment. Both years were above the industry average of 28.41%. This demonstrates a better return on equity than the industry average.