Q: 17.5 Consider the following financial statements for Green Valley Nursing Home. Inc., a for-profit,.
17.5 Consider the following financial statements for Green Valley Nursing Home. Inc., a for-profit, long-term care facility: 17.5 Consider the following financial statements for Green Valley Nursing Home. Inc., a for profit, long-term care facility: Green Valley Nursing Home, Inc. Statement of Income and Retained Earnings Year Ended December 31, 2011 Revenue Net patient service revenue Other revenue Total revenues $3,163,258 $106,146 $3,269,404 Expenses Salaries and benefits Medical supplies and drugs Insurance and other Provision for bad debts Depreciation Interest Total expenses $1,515,438 $966,781 $296,357 $110,000 $85,000 $206,780 $3,180,356 Operating income Provision for income taxes $89,048 $31,167 Net income $57,881 Retained earnings, beginning of year Retained earnings, end of year $199,961 $257,842 Green Valley Nursing Home, Inc. ( Balance Sheet December 31,2011) Assets Current Assets Cash Marketable securities Net patient accounts receivable Supplies Total current assets Property and equipment Less accumulated depreciation Net property and equipment Total assets 105737 200000 215600 87655 608992 2250000 356000 1894000 2502992 Liabilities and Shareholders Equity Current liabilities Accounts payable Accrued expenses Notes payable Current portion of long-term debt Total current liabilities Long-term debt Shareholder’s Equity Common stock, $10 par value Retained earnings Total shareholder’s equity $72,250 $192,900 $100,000 $80,000 $445,150 $1,700,000 $100,000 $257,842 $357,842 Total liabilities & shareholder’s equity $2,502,992 a. Perform a Du Pont analysis on Green Valley. Assume that the industry average ratios are as follows: Total margin Total asset turnover Equity multiplier Return on equity (ROE) 3.5% 1.5 2.5 13.1% b. Calculate and interpret the following ratios: Return on assets (ROA) Current ratio Days cash on hand Average collection period Debt ratio Debt-to-equity ratio Times interest earned (TIE) ratio Fixed asset turnover ratio Industry Average 5.2% 2.0 22 days 19 days 71 % 2.5 2.6 1.4 c. Assume that there are 10,000 shares of Green Valley’s stock outstanding and that some recently sold for $45 per share. * What is the firm’s price/earnings ratio? * What is its market/book ratio?
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