b Interpret the ration theap For the comparative a boh U dat

b. Interpret the ration theap For the comparative a boh U data presented in the book ane der the followi o-for profit managed Bestean iet Assets, Year Ended June 20,201s HMO S HMO Statement of Operations and (in thousands) inancial Revenue: Premiums earned Coinsurance Interest and other i Total revenues Expenses Salaries and benefits Medical supplies and drugs Insurance Provision for bad debts Depreciation Interest Total expenses Net income $26 682 1689 ncome 242 $28,613 h of the $15,154 7,507 3963 19 367 385 $27,395 S 1218 able) hich Net assets, beginning of year Net assets, end of year $ 900 s 2118 lion gin BestCare HMO Balance Sheet, June 30, 2015 (in thousands) Assets: Cash and cash equivalents Net premiums receivable Supplies Total current assets Net property and equipment Total assets $2,737 821 $3,945 $5,924 $9 (continued)

Solution

a. DuPont on Bestcare
ROE = (Net Profit/Sales) * (Sales/Total Assets) * (Total Assets/Avg Shareholder Equity) = (1218/28613)*(28613/9869)*(9869/1509) = 80.72%... Bestcare is performing better than industry average.
Avg Equity = (900+2118)/2 = $1,509