Financial Statements

Assess cost concepts, management control processes of budgeting, revenue cycle management, working capital, time value analysis, capital budgeting analysis, and long-term financing decisions.

Instructions

Solve the following financial problems, and submit the answers, including your work, in a Word or Excel document:

Problem 3.5 from following;

Brandywine Homecare, a non-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 depreciation expense. Now, what would be the impact on net income, total profit margin, and cash flow?

Problem 4.5 from the following;

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

Liability and Net Assets

Account payable –medical services                              $2, 145

Accrued expense                                                                 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)     How does this balance sheet differ from the one percent in exhibit 4.1 for Sunnyvale?

b)     What is BestCare’s net working capital for 2011?

c)     What is BestCare’s debt ration? How does it compare with Sunnyvale’s debt ratio?

Problem 4.6 from the following;

Please check the balance sheet for Green Valley Nursing, Home, Inc. is in the attached file, and follow the question below;

a)     How does this balance sheet differ from the ones presented in Exhibit 4.1 and 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 ratio for Sunnyvale and BestCare?