Question: Consider this income statement: Green Valley Nursing Home Statement of Income Year Ended 12/31/15 Revenue:
Patient Service revenue $3,163,258
Less Provision for bad debt (110,000)
Net Patient service revenue $3,053,258
Other Revenue 106,146
Net Operating Revenues $3,159,404
Expenses:
Salaries and Benefits $1,525,438
Medical Supplies and drugs 966,781
Insuranace and Other 296,357
Depreciation 85,000
Interest 206,780
Total Expenses $3,070,356
Operating income $89,048
Provision for income taxes 31,167
Net Income $57,881
A. Why does Green Valley show a provision for income taxes while the other two income statements do not?
B. What is Green Valley's total profit margin? How does this value compare with the values for Sunnyvale Clinic and BestCare?
C. The before-tax profit margin for Green Valley is operating income divided by total revenues. Calculate Green Valley's before-tax profit margin. Why might this be a better measure of expense control when comparing an investor-owned busincess with a not-for-profit business?