In: Accounting
Using the information presented in the Financial Statements of United Health Care, a major HMO, compute financial ratios for 2016 and 2017 and discuss some of the primary observations that you would conclude regarding the financial performance of the firm. Provide an overall evaluation of the financial position of this company.
United Healthcare Financial Ratios
Health Plan Median 2017 2016 2015
Liquidity
Current 1.32 ? ? .93
Days in Receivables 22.5 ? ? 19.8
Days Cash on Hand 89.9 ? ? 53.6
Capital Structure
Equity Financing % 48.9 ? ? 60.7%
Long Term Debt to Equity % 13.0 ? ? 3.67%
Cash Flow to Total Debt % 15.0 ? ? 37.7%
Times Interest Earned 13.1 ? ? 109.5
Activity
Total Asset Turnover 1.55 ? ? 1.74
Fixed Asset Turnover 16.8 ? ? 24.6
Current Asset Turnover 2.88 ? ? 5.07
Profitability
Total Margin % 3.6 ? ? 6.81
Return on Equity % 11.6 ? ? 19.6
Income Statement (000$)
Fiscal Year Ending 12/31/17 12/31/16 12/31/15
Net sales 5,670,878 3,768,882 3,115,202
Cost of goods 3,930,933 2,643,107 2,236,588
Gross profit 1,739,945 1,125,775 878,614
Selling, general and administration 1,030,906 555,649 491,635
Income before depreciation and 709,039 570,126 386,979
amortization
Depreciation and amortization 94,458 64,079 50,628
Nonoperating income -153,796 -35,940 122
Interest expense 771 2,163 3,046
Income before taxes 460,014 467,944 333,427
Provision for income tax 170,205 177,822 119,379
Minority interest 3,845 1,983 1,970
Net income before extraordinaries 285,964 288,139 212,078
Extraordinary items and discounted
Operations NA 1,377,075 NA
Net income 285,964 1,665,214 212,078
United Healthcare Corporation Balance Sheet (Data in Thousands)
Fiscal Year Ending 12/31/17 12/31/16 12/31/15
Assets
Cash 940,110 1,519,049 228,260
Marketable securities 863,815 135,287 172,610
Receivables 550,313 167,369 169,075
Other current assets 512,883 86,510 44,023
Total current assets 2,867,121 1,908,215 613,968
Prop. Plant, Equipment 417,166 273,431 215,628
Less Accumulated Depreciation 149,514 110,834 88,886
Net Prop and Equipment 267,652 162,597 126,742
Investment in Subsidiaries 1,274,470 1,115,054 768,563
Intangibles 1,751,743 303,613 278,081
Total assets 6,160,986 3,489,479 1,787,354
Liabilities
Accounts payable 1,236,217 470,591 535,863
Accrued expenses 566,770 122,993 52,027
Other current liabilities 631,009 70,718 70,844
Total current liabilities 2,433,996 664,302 658,734
Noncurrent capital leases 38,970 29,721 39,099
Total Liabilities 2,472,966 694,023 697,833
Preferred stock 500,000 NA NA
Common stock net 1,752 1,728 1,691
Capital surplus 822,429 752,472 659,359
Retained earnings 2,358,640 2,085,056 424,468
Other equities 5,199 -43,800 -108
Shareholders equity 3,688,020 2,795,456 1,085,410
Total liability and net worth 6,160,986 3,489,479 1,783,243
Current Ratio = Current Assets / Current Liabilities
2017 = 2867121 / 2433996 = 1.17
2016 = 1908215 / 664302 = 2.87
Days in Receivable = Account Receivable / Sales * 365 days
2017 = 550313 / 5670878 * 365 = 35.42 days
2016 = 167369 / 3768882 * 365 = 16.21 days
Days cash on hand = Cash / (Operating Expenses - Dep.) * 365
days
But as per this formula. Answer given of 2015 is not matching.
Don't know what is the difference. Hence not calculated.
Equity Financing = Equity / Total Assets
2017 = 3688020 / 6160986 = 59.86 %
2016 = 2795456 / 3489479 = 80.11 %
Long Term Debt to Equity = Long term debt / Equity
2017 = 38970 / 3688020 = 1.05 %
2016 = 29721 / 2795456 = 1.06%
Times Interest Earned = Income before Interest and Tax /
Interest Expense
2017 = (460014 + 771) / 771 = 597.65 times
2016 = (467944 + 2163) / 2163 = 217.34 times
Here the calculatiin of 2015 is based on Income after Interest. but
which is not as per formula.
Total Assets Turnover = Turnover / Total Assets
2017 = 5670878 / 6160986 = 0.92
2016 = 3768882 / 3489479 = 1.08
Fixed Asset Turnover = Net Sales / Fixed Assets
Current Asset Turnover = Net Sales / Current Assets
Total Margin ratio = Net Income / Turnover
Return on Equity = Net Income / Shareholders Equity