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 forprofit, 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?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    $3,163,258       
Other revenue    $106,146       
Total revenues    $3,269,404       
             
Expenses            
Salaries and benefits    $1,515,438       
Medical supplies and drugs    $966,781       
Insurance and other    $296,357       
Provision for bad debts    $110,000       
Depreciation    $85,000       
Interest    $206,780       
Total expenses    $3,180,356       
             
Operating income    $89,048       
Provision for income taxes    $31,167       
             
Net income    $57,881       
             
Retained earnings, beginning of year    $199,961       
Retained earnings, end of year    $257,842    



Green Valley Nursing Home, Inc. (Balance Sheet December 31,2011)


 
Assets            
Current Assets            
Cash    105737       
Marketable securities    200000       
Net patient accounts receivable    215600       
Supplies    87655       
Total current assets    608992       
             
Property and equipment    2250000       
Less accumulated depreciation    356000       
Net property and equipment    1894000       
             
Total assets    2502992    


Liabilities and Shareholders Equity
 
Current liabilities            
Accounts payable    $72,250       
Accrued expenses    $192,900       
Notes payable    $100,000       
Current portion of long-term debt    $80,000       
Total current liabilities    $445,150       
Long-term debt    $1,700,000       
Shareholder's Equity            
Common stock, $10 par value    $100,000       
Retained earnings    $257,842       
Total shareholder's equity    $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    3.5%
Total asset turnover    1.5
Equity multiplier    2.5
Return on equity (ROE)                       13.1%
b. Calculate and interpret the following ratios:
Industry Average
Return on assets (ROA)    5.2%
Current ratio    2.0
Days cash on hand    22 days
Average collection period    19 days
Debt ratio    71 %
Debt-to-equity ratio    2.5
Times interest earned (TIE) ratio    2.6
Fixed asset turnover ratio    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?