Financial management course- mmha6160 week-2 assignment -finance 3.5

week-2 assignment -finance

3.5 Brandywine Homecare Homecare, a not-for-profit business, had revenues of $12 million in 2011. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million. All revenues were collected in cash during the year and all expenses other than depreciation were paid in cash.
    a. Construct Brandywine’s 2011 income statement.
    b. What were Brandywine’s net income, total profit margin, and cash flow?
    c. Now, suppose the company changed its depreciation calculation procedures (still within GAP)
such that its depreciation expense doubled. How would this change affect Brandywine’s net
income, total profit margin, and cash flow?

    d. Suppose the change had halved, rather than doubled, the firm’s depreciation expense. Now,
    what would be the impact on net income, total profit margin, and cash flow?

4.5 Consider the following balance sheet:
                Best Care HMO
                Balance Sheet
                June 30, 2011
                (in thousands)
Current Assets:
Cash                        $2,737
Net premiums receivable                                          821
Supplies                    387
      Total current assets                                               $3,945
Net property and equipment            $5,924
Total assets                                                                    $9,869

Liabilities and Net Assets
Accounts payable-medical services                         $2,145
Accured expenses                                                             929
Notes payable                                                                    382
    Total current liabilities             $3,456
Long-term debt                    $4,295
     Total liabilities                $7,751
Net assets-unrestricted
(equity)                                                                          $2,118

Total liabilities and net assets                                   $9,869

a.    What is BestCare’s net working capital for 2011?
b.    What is BestCare’s debt ratio?

4.6 Consider this balance sheet
Green Valley Nursing Home, Inc.
Balance Sheet
December 31, 2011
Current Assets:
   Cash                                $   105,737
   Investments                                  200,000
   Net patient accounts receivable                      215,600
   Supplies                            87,655
Total current assets                                                                       $   608,992
   Property and equipment                    $2,250,000
   Less accumulated depreciation                     356,000
       Net property and equipment                                                         $1,894,000
   Total assets                                                                                            $2,502,992

Liabilities and Shareholders’ Equity
Current Liabilities:
   Accounts payable                                                                               $       72,250
   Accrued expenses                                                                                      192,900
Notes payable                                                                                             180,000
            Total current liabilities                                 $      445,150
   Long-term debt                    $   1,700,000
Shareholder’s Equity:
Common stock, $10 par value                                                            $      100,000
Retained earnings                                                                                          257,842
       Total shareholders’ equity                                                            $      357,842

Total liabilities and shareholders’ equity                                         $  2,502,992

a.    How does this balance sheet differ from the one’s presented in Problem 4.5?
b.    What is Green Valley’s net working capital for 2011?
c.    What is Green Valley’s debt ratio? How does it compare with the debt ratios for Sunnyvale and BestCare?

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