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    ROE Profit Margin Total Asset Turnover Equity Multiplier

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    katkris2001
    This document presents the results of a Du Pont analysis and calculation of various financial ratios for BestCare HMO. The Du Pont analysis yields a return on equity (ROE) of 5.75%, below the industry average of 25.5%. BestCare's return on assets is 12.3%, current ratio is 1.14, days cash on hand is 36.46 days, debt-to-equity ratio is 2.03, times interest earned ratio is 5.5, and fixed asset turnover ratio is 4.83. The average collection period is calculated to be 6.38 days.

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    ROE Profit Margin Total Asset Turnover Equity Multiplier

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    katkris2001
    2K views2 pages
    This document presents the results of a Du Pont analysis and calculation of various financial ratios for BestCare HMO. The Du Pont analysis yields a return on equity (ROE) of 5.75%, below the industry average of 25.5%. BestCare's return on assets is 12.3%, current ratio is 1.14, days cash on hand is 36.46 days, debt-to-equity ratio is 2.03, times interest earned ratio is 5.5, and fixed asset turnover ratio is 4.83. The average collection period is calculated to be 6.38 days.

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    Week3Assignment Brown K

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    This document presents the results of a Du Pont analysis and calculation of various financial ratios for BestCare HMO. The Du Pont analysis yields a return on equity (ROE) of 5.75%, below the industry average of 25.5%. BestCare's return on assets is 12.3%, current ratio is 1.14, days cash on hand is 36.46 days, debt-to-equity ratio is 2.03, times interest earned ratio is 5.5, and fixed asset turnover ratio is 4.83. The average collection period is calculated to be 6.38 days.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    2K views2 pages

    ROE Profit Margin Total Asset Turnover Equity Multiplier

    Uploaded by

    katkris2001
    This document presents the results of a Du Pont analysis and calculation of various financial ratios for BestCare HMO. The Du Pont analysis yields a return on equity (ROE) of 5.75%, below the industry average of 25.5%. BestCare's return on assets is 12.3%, current ratio is 1.14, days cash on hand is 36.46 days, debt-to-equity ratio is 2.03, times interest earned ratio is 5.5, and fixed asset turnover ratio is 4.83. The average collection period is calculated to be 6.38 days.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 2

    Kristen Brown

    Financial Management (MMHA - 6160 - 14)


    Professor Laura Forbes
    May 20, 2014

    Problem 17.4: Consider the following financial statements from BestCare HMO, a not for profit
    managed care plan:
    A. 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%

    Answer: The Du Pont analysis would be done with the following formula.
    ROE = Profit Margin* Total Asset Turnover* Equity Multiplier
    Net Income/Total Equity = Net Income/Total Revenue * Total Revenue/Total Assets* Total
    Assets/ Total Equity
    (1218/28613)= 4.2%
    (28613/9869)= 2.89
    (9869/2118) = 4.85
    4.2% * 2.89% * 4.85=.575
    B. Calculate and interpret the following ratios 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
    Times interest earned (TIE) ratio 2.8
    Fixed asset turnover ratio 5.2

    Answer:
    Return on Assets (ROA) 1218/9869 = 12.3%
    Current Ratio 3947/3456 = 1.14
    Days Cash on Hand 2337(27395/365) = 36.46
    Debt to Equity 4295/2118 = 2.03
    Times Interest Earned (TIE) Ratio 2118/385 = 5.5
    Fixed Asset Turnover Ratio 28613/5924 = 4.83
    Average Collection Period 821 (28613/365) =6.38

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