Problem 1: Brandywine 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 GAAP) 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 de-predation expense. Now, what would be the impact on net income, total profit margin, and cash flow?
Problem 2: Consider the following balance sheet:
BestCare HMO Balance Sheet June 30, 2011 (in thousands)
| Assets |
|
| 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 |
| Total assets |
$9,869 |
| Liabilities and Net Assets |
|
| Accounts payable-medical |
|
| services |
$2,145 |
| Accrued expenses |
929 |
| Notes payable |
382 |
| Total current liabilities |
$3,456 |
| Long-term debt |
$4,295 |
| Total liabilities |
$7,751 |
| Net asters-unrestricted |
|
| (equity) |
$2,118 |
| Total liabilities and net |
|
| assets |
$9,869 |
a. How does this balance sheet differ from the one presented in Exhibit for Sunnyvale?
b. What is BestCare's net working capital for 2011?
c. What is BcstCarc's debt ratio? How dots it compare with Sunnyvalc's debt ratio?
Problem 3: Consider this balance sheet:
Green Valley Nursing Home, Inc.
Balance Sheet December 31, 2011
|
Assets
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
|
$1894 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
|
$1700 000
|
|
Shareholders' Equity:
|
|
|
Common stock, $10 par value
|
$100,000
|
|
Retained earnings
|
257,842
|
|
Total shareholders' equity
|
$357,842
|
|
Total liabilities and shareholders' equity
|
$2502 992
|
a. How does this balance sheet differ from the ones presented in Exhibit and Problem 2?
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?