Consider this income statement: Green Valley Nursing Home, Inc. Statement of Income Revenue: Year Ended December 31, 2015 Patient service revenue $3,163,258 Less provision for bad debts Net patient service revenue Other revenue Net operating revenues Expenses: Salaries and benefits Medical supplies and drugs Insurance and other Depreciation Interest (110,000) $3,053,258 106,146 $3,159,404 a. How does this income statement differ from the ones presented in Exhibit 3.1 and Problem 3.2? b. Why does Green Valley show a provision for income taxes while the other two income statements do not? c. What is Green Valley's total profit margin? How does this value compare with the values for Sunnyvale Clinic and BestCare? d. The before-tax profit margin for Green Valley is operating income divided by total revenues. Calculate Green Valley's before-tax profit margin. Why might this be a better measure of expense control when comparing an investor-owned business with a not- for-profit business? Reference for A Operating Revenues: Patient service revenue Less: Provision for bad debts Net patient service revenue Premium revenue Other revenue Net operating revenues Expenses: Salaries and benefits Supplies Insurance 2015 2014 $ 150,118 EXHIBIT 3.1 Sunnyvale Clinic: Statements of Operations, $123,565 2,000 1,800 Years Ended $ 148,118 18,782 3,079 $121,765 16,455 December 31, 2,704 2015 and 2014 $ 169,979 $140,924 (in thousands) $ 126,223 $102,334 20,568 18,673 4,518 3,710 3,189 2,603 6,405 5,798 5,329 3,476 $166,232 $136,594 $ 3,747 $ 4,330 Nonoperating income: Contributions $ 243 $ Investment income 3,870 198 3,678 Revenue: Premiums earned Coinsurance Interest and other income $26,682 1,689 242 Total nonoperating income $ 4,113 $ 3,876 Net income $ 7,860 $ 8,206 Total revenues $28,613 $1,515,438 Total expenses 966,781 296,357 85,000 206,780 $3,070,356 Operating income $ 89,048 Provision for income taxes 31,167 Reference for A Net income $ 57,881 3.2 Consider the following income statement: BestCare HMO Statement of Operations Year Ended June 30, 2015 (in thousands) Lease Depreciation Interest Total expenses Operating income Expenses: Salaries and benefits $15,154 Medical supplies and drugs 7,507 Insurance 3,963 Depreciation 367 385 Interest Total expenses Net income $27,376 $ 1,237

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Consider this income statement:
Green Valley Nursing Home, Inc.
Statement of Income
Revenue:
Year Ended December 31, 2015
Patient service revenue
$3,163,258
Less provision for bad debts
Net patient service revenue
Other revenue
Net operating revenues
Expenses:
Salaries and benefits
Medical supplies and drugs
Insurance and other
Depreciation
Interest
(110,000)
$3,053,258
106,146
$3,159,404
a. How does this income statement differ from the ones presented in
Exhibit 3.1 and Problem 3.2?
b. Why does Green Valley show a provision for income taxes while
the other two income statements do not?
c. What is Green Valley's total profit margin? How does this value
compare with the values for Sunnyvale Clinic and BestCare?
d. The before-tax profit margin for Green Valley is operating income
divided by total revenues. Calculate Green Valley's before-tax
profit margin. Why might this be a better measure of expense
control when comparing an investor-owned business with a not-
for-profit business?
Reference for A
Operating Revenues:
Patient service revenue
Less: Provision for bad debts
Net patient service revenue
Premium revenue
Other revenue
Net operating revenues
Expenses:
Salaries and benefits
Supplies
Insurance
2015
2014
$ 150,118
EXHIBIT 3.1
Sunnyvale
Clinic:
Statements of
Operations,
$123,565
2,000
1,800
Years Ended
$ 148,118
18,782
3,079
$121,765
16,455
December 31,
2,704
2015 and 2014
$ 169,979
$140,924
(in thousands)
$ 126,223
$102,334
20,568
18,673
4,518
3,710
3,189
2,603
6,405
5,798
5,329
3,476
$166,232
$136,594
$
3,747
$ 4,330
Nonoperating income:
Contributions
$
243
$
Investment income
3,870
198
3,678
Revenue:
Premiums earned
Coinsurance
Interest and other income
$26,682
1,689
242
Total nonoperating income
$
4,113
$ 3,876
Net income
$
7,860
$ 8,206
Total revenues
$28,613
$1,515,438
Total expenses
966,781
296,357
85,000
206,780
$3,070,356
Operating income
$
89,048
Provision for income taxes
31,167
Reference for A
Net income
$
57,881
3.2 Consider the following income statement:
BestCare HMO
Statement of Operations
Year Ended June 30, 2015
(in thousands)
Lease
Depreciation
Interest
Total expenses
Operating income
Expenses:
Salaries and benefits
$15,154
Medical supplies and drugs
7,507
Insurance
3,963
Depreciation
367
385
Interest
Total expenses
Net income
$27,376
$ 1,237
Transcribed Image Text:Consider this income statement: Green Valley Nursing Home, Inc. Statement of Income Revenue: Year Ended December 31, 2015 Patient service revenue $3,163,258 Less provision for bad debts Net patient service revenue Other revenue Net operating revenues Expenses: Salaries and benefits Medical supplies and drugs Insurance and other Depreciation Interest (110,000) $3,053,258 106,146 $3,159,404 a. How does this income statement differ from the ones presented in Exhibit 3.1 and Problem 3.2? b. Why does Green Valley show a provision for income taxes while the other two income statements do not? c. What is Green Valley's total profit margin? How does this value compare with the values for Sunnyvale Clinic and BestCare? d. The before-tax profit margin for Green Valley is operating income divided by total revenues. Calculate Green Valley's before-tax profit margin. Why might this be a better measure of expense control when comparing an investor-owned business with a not- for-profit business? Reference for A Operating Revenues: Patient service revenue Less: Provision for bad debts Net patient service revenue Premium revenue Other revenue Net operating revenues Expenses: Salaries and benefits Supplies Insurance 2015 2014 $ 150,118 EXHIBIT 3.1 Sunnyvale Clinic: Statements of Operations, $123,565 2,000 1,800 Years Ended $ 148,118 18,782 3,079 $121,765 16,455 December 31, 2,704 2015 and 2014 $ 169,979 $140,924 (in thousands) $ 126,223 $102,334 20,568 18,673 4,518 3,710 3,189 2,603 6,405 5,798 5,329 3,476 $166,232 $136,594 $ 3,747 $ 4,330 Nonoperating income: Contributions $ 243 $ Investment income 3,870 198 3,678 Revenue: Premiums earned Coinsurance Interest and other income $26,682 1,689 242 Total nonoperating income $ 4,113 $ 3,876 Net income $ 7,860 $ 8,206 Total revenues $28,613 $1,515,438 Total expenses 966,781 296,357 85,000 206,780 $3,070,356 Operating income $ 89,048 Provision for income taxes 31,167 Reference for A Net income $ 57,881 3.2 Consider the following income statement: BestCare HMO Statement of Operations Year Ended June 30, 2015 (in thousands) Lease Depreciation Interest Total expenses Operating income Expenses: Salaries and benefits $15,154 Medical supplies and drugs 7,507 Insurance 3,963 Depreciation 367 385 Interest Total expenses Net income $27,376 $ 1,237
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