Review the following information on balance sheet analysis and business calculations:
Calculating Debt Ratio in Excel
Review the following balance sheet:
Best Care Health Maintenance Organization (HMO) | |||
Balance Sheet | |||
June 30, 2011 (in thousands) | |||
Assets | |||
Current assets: Cash | |||
$2,737 | |||
$821 | |||
$387 | |||
Total current assets | $3,945 | $3,945 | |
Net property and equipment | $5,924 | ||
Total assets | $9,869 | ||
Liabilities and Net Assets | |||
Accounts payable—medical services | $2,145 | ||
Accrued expenses | $929 | ||
Notes payable | $382 | ||
Total current liabilities | $3,456 | $3,456 | |
Long-term debt | $4,295 | ||
Total liabilities | $7,751 | $7,751 | |
Total assets | $9,869 | ||
Net assets-unrestricted (equity) | $2,118 | ||
Total liabilities and net assets | $9,869 | ||
Answer the following questions after your analysis:
- What is Best Care’s net working capital for 2011? Show your work.
- What is Best Care’s debt ratio? Show your work.
To support your work, use your course and textbook readings and also use the South University Online Library. As in all assignments, cite your sources in your work and provide references for the citations in APA format.
Expert Solution Preview
Introduction:
The following questions are based on a balance sheet of a company called Best Care Health Maintenance Organization (HMO). As a medical professor responsible for creating college assignments and evaluating student performance, let’s review the questions and provide answers.
1. What is Best Care’s net working capital for 2011? Show your work.
Solution:
The net working capital can be calculated by subtracting current liabilities from current assets. Therefore, Best Care’s net working capital for 2011 is as follows:
Net Working Capital = Current Assets – Current Liabilities
i.e., Net Working Capital = $3,945 – $3,456
Net Working Capital = $489 (in thousands)
Hence, Best Care’s net working capital for 2011 is $489,000.
2. What is Best Care’s debt ratio? Show your work.
Solution:
The debt ratio can be calculated by dividing total liabilities by total assets. Therefore, Best Care’s debt ratio for 2011 is as follows:
Debt Ratio = Total Liabilities / Total Assets
i.e., Debt Ratio = $7,751 / $9,869
Debt Ratio = 0.7857
Hence, Best Care’s debt ratio for 2011 is 0.7857 or 78.57%.
