Response to the following problem:
Consider the following financial statements for BestCare HMO, a not profit managed care plan. Perform a DU Pont analysis on BestCare.
Assume that the industry average ratios are as follows:
Total margin 3.8%
Total Asset turnover 2.1
Equity multiplier 3.2
Return on equity (ROE) 25.5%
Calculate and interpret the following rations for BestCare:
Return on assets (ROA) 8.0%
Current ratio 1.3
Days cash on hand 41 days
Average collection period 7 days
Debt ratio 69%
Debt 'to-equity ratio 2.2
Time interest earned (TIE) ratio 2.8
Fixed asset turnover ratio 5.2