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Business Finance Healthcare Finance: An Introduction to Accounting and Financial Management

( a) To construct: The income statement of M Co. Introduction: Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned the company.While preparing income statement, contractual discounts & allowances are deducted from revenue because it is not received from the customers. The income statement of M Co. can be presented as follows: Particulars Amount (Mn) Revenue 12.0 Expenses ($12*75%) (9.0) Depreciation (1.5) Profit before tax (A) 1.5 Tax @ 40% (B) 0.6 Net income (A) - (B) 0.9 ( b) To find: The net income, total profit margin and cash flows of M Co. Introduction: Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned the company.While preparing income statement, contractual discounts & allowances are deducted from revenue because it is not received from the customers. Net income of M Co. Particulars Amount (Mn) Revenue 12.0 Expenses ($12*75%) (9.0) Depreciation (1.5) Profit before tax (A) 1.5 Tax @ 40% (B) 0.6 Net income (A) - (B) 0.9 Total profit margin of M Co. Total profit margin = Net income Revenue × 100 = $ 0.9 $ 12 × 100 = 7.5 % Cash flows of M Co. Cash flows = Net income + Depreciation = 0.9 + 1.5 = $2 .4 million ( c) To construct: The income statement of M Co. considering depreciation expense is doubled. Introduction: Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned the company.While preparing income statement, contractual discounts & allowances are deducted from revenue because it is not received from the customers. The income statement of M Co. can be presented as follows: Particulars Amount (Mn) Revenue 12.0 Expenses ($12*75%) (9.0) Depreciation (3.0) Profit before tax (A) 0.0 Tax @ 40% (B) 0.0 Net income (A) - (B) 0.0 Net income of M Co. As per the income statement presented above, the net income of M Co. is $0 million. Total profit margin of M Co. Total profit margin = Net income Revenue × 100 = $ 0.0 $ 12 × 100 = 0 % Cash flows of M Co. Cash flows = Net income + Depreciation = 0.0 + 3.0 = $3 .0 million ( d) To construct: The income statement of M Co. considering depreciation expense is halved. Introduction: Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned the company.While preparing income statement, contractual discounts & allowances are deducted from revenue because it is not received from the customers. The income statement of M Co. can be presented as follows: Particulars Amount (Mn) Revenue 12.0 Expenses ($12*75%) (9.0) Depreciation (0.75) Profit before tax (A) 2.25 Tax @ 40% (B) 0.9 Net income (A) - (B) 1.35 Net income of M Co. As per the income statement presented above, the net income of M Co. is $1.35million. Total profit margin of M Co. Total profit margin = Net income Revenue × 100 = $ 1.35 $ 12 × 100 = 11.25 % Cash flows of M Co. Cash flows = Net income + Depreciation = 1.35 + 0.75 = $2 .1 million

( a) To construct: The income statement of M Co. Introduction: Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned the company.While preparing income statement, contractual discounts & allowances are deducted from revenue because it is not received from the customers. The income statement of M Co. can be presented as follows: Particulars Amount (Mn) Revenue 12.0 Expenses ($1275%) (9.0) Depreciation (1.5) Profit before tax (A) 1.5 Tax @ 40% (B) 0.6 Net income (A) - (B) 0.9 ( b) To find: The net income, total profit margin and cash flows of M Co. Introduction: Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned the company.While preparing income statement, contractual discounts & allowances are deducted from revenue because it is not received from the customers. Net income of M Co. Particulars Amount (Mn) Revenue 12.0 Expenses ($1275%) (9.0) Depreciation (1.5) Profit before tax (A) 1.5 Tax @ 40% (B) 0.6 Net income (A) - (B) 0.9 Total profit margin of M Co. Total profit margin = Net income Revenue × 100 = $ 0.9 $ 12 × 100 = 7.5 % Cash flows of M Co. Cash flows = Net income + Depreciation = 0.9 + 1.5 = $2 .4 million ( c) To construct: The income statement of M Co. considering depreciation expense is doubled. Introduction: Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned the company.While preparing income statement, contractual discounts & allowances are deducted from revenue because it is not received from the customers. The income statement of M Co. can be presented as follows: Particulars Amount (Mn) Revenue 12.0 Expenses ($1275%) (9.0) Depreciation (3.0) Profit before tax (A) 0.0 Tax @ 40% (B) 0.0 Net income (A) - (B) 0.0 Net income of M Co. As per the income statement presented above, the net income of M Co. is $0 million. Total profit margin of M Co. Total profit margin = Net income Revenue × 100 = $ 0.0 $ 12 × 100 = 0 % Cash flows of M Co. Cash flows = Net income + Depreciation = 0.0 + 3.0 = $3 .0 million ( d) To construct: The income statement of M Co. considering depreciation expense is halved. Introduction: Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned the company.While preparing income statement, contractual discounts & allowances are deducted from revenue because it is not received from the customers. The income statement of M Co. can be presented as follows: Particulars Amount (Mn) Revenue 12.0 Expenses ($1275%) (9.0) Depreciation (0.75) Profit before tax (A) 2.25 Tax @ 40% (B) 0.9 Net income (A) - (B) 1.35 Net income of M Co. As per the income statement presented above, the net income of M Co. is $1.35million. Total profit margin of M Co. Total profit margin = Net income Revenue × 100 = $ 1.35 $ 12 × 100 = 11.25 % Cash flows of M Co. Cash flows = Net income + Depreciation = 1.35 + 0.75 = $2 .1 million

Solution Summary: The author explains the income statement of M Co., which presents revenues and expenses in a structured way to reflect the net income/loss earned the company.

Healthcare Finance: An Introduction to Accounting and Financial Management

Healthcare Finance: An Introduction to Accounting and Financial Management

6th Edition

ISBN: 9781567937411

Author: Louis C. Gapenski, Kristin L. Reiter

Publisher: Health Administration Press

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Healthcare Finance: An Introduction to Accounting and Financial Management

Ch. 3 - Prob. 1.1STQ Ch. 3 - Prob. 1.2STQ Ch. 3 - Prob. 2.1STQ Ch. 3 - Prob. 2.2STQ Ch. 3 - Prob. 2.3STQ Ch. 3 - Prob. 3.1STQ Ch. 3 - Prob. 3.2STQ Ch. 3 - Prob. 3.3STQ Ch. 3 - Prob. 3.4STQ Ch. 3 - Prob. 3.5STQ

Ch. 3 - Prob. 4.1STQ Ch. 3 - Prob. 4.2STQ Ch. 3 - Prob. 4.3STQ Ch. 3 - Prob. 5.1STQ Ch. 3 - Prob. 5.2STQ Ch. 3 - Prob. 5.3STQ Ch. 3 - Prob. 6.1STQ Ch. 3 - Prob. 6.2STQ Ch. 3 - Prob. 7.1STQ Ch. 3 - Prob. 7.2STQ Ch. 3 - Prob. 7.3STQ Ch. 3 - Prob. 8.1STQ Ch. 3 - Prob. 8.2STQ Ch. 3 - Prob. 8.3STQ Ch. 3 - Prob. 8.4STQ Ch. 3 - Prob. 9.1STQ Ch. 3 - Prob. 9.2STQ Ch. 3 - Prob. 9.3STQ Ch. 3 - Prob. 10.1STQ Ch. 3 - Prob. 10.2STQ Ch. 3 - Prob. 11.1STQ Ch. 3 - Prob. 11.2STQ Ch. 3 - Prob. 12.1STQ Ch. 3 - Prob. 12.2STQ Ch. 3 - Prob. 12.3STQ Ch. 3 - Prob. 13.1STQ Ch. 3 - Prob. 13.2STQ Ch. 3 - Prob. 13.3STQ Ch. 3 - Prob. 13.4STQ Ch. 3 - Prob. 14.1STQ Ch. 3 - Prob. 14.2STQ Ch. 3 - Prob. 14.3STQ Ch. 3 - Prob. 15.1STQ Ch. 3 - Prob. 15.2STQ Ch. 3 - Prob. 16.1STQ Ch. 3 - Prob. 16.2STQ Ch. 3 - Prob. 3.1Q Ch. 3 - Prob. 3.2Q Ch. 3 - Prob. 3.3Q Ch. 3 - Prob. 3.4Q Ch. 3 - Prob. 3.5Q Ch. 3 - Prob. 3.6Q Ch. 3 - Prob. 3.7Q Ch. 3 - Prob. 3.8Q Ch. 3 - Prob. 3.9Q Ch. 3 - Prob. 3.1P Ch. 3 - Prob. 3.2P Ch. 3 - Prob. 3.3P Ch. 3 - Prob. 3.4P Ch. 3 - Prob. 3.5P Ch. 3 - Prob. 3.6P Ch. 3 - Prob. 3.7P Ch. 3 - Prob. 3.8P Ch. 3 - Prob. 3.9P

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