Application: Week 2 Numerical Problems
Edilsavier Hernandez
Walden University

1. Problem 3.5 form page 106, Chapter 3

a. Brandywine’s 2001 income statement:

Brandywine Homecare
December 31, 2011.
Statement of income Revenues: $12,000,000 Expenses: (expenses - $9,000,000)+(depreciation - $1,500,000): total expenses: $10,500,000 Net income: $1,500,000

b. Net income, total profit margin, and cash flow

Net income: total revenues – total expenses: $1,500,000
Total profit margin: [net income / revenues] *100 = $12.5
Cash flow: net income + depreciation: $3,000,000

c. How changes affect if depreciating value doubles:
Now depreciating value is $3,000,000
Net income: total revenues – total expenses: $0
Total profit margin: [net income / revenues] *100 = $0
Cash flow: net income + depreciation: $3,000,000

d. Impact if depreciating expenses halves
Now depreciating value is $750,000
Net income: total revenues – total expenses: $2,250,000
Total profit margin: [net income / revenues] *100 = $18.75
Cash flow: net income + depreciation: $3,000,000

2. Problem 4.5 form page 141, Chapter 4
Balanced sheet: a. The balanced sheet differs from the one presented in Exhibit 4.1 for Sunnyvale due to difference in the cases of total assets, total liabilities, and debt ratio. The values of assets and liabilities for BestCare HMO is showing less values than does of Sunnyvale Clinic. The assets and long term investment of Sunnyvale is showing more resources. And the liabilities and equity values for Sunnyvale is having more financial resources and values.

b. BestCare HMO net working capital for 2011: total current assets – total current liabilities = $3,945 - $3,456 = $489

c. BestCare HMO debt ratio: total liabilities / total assets = $7,751 / $9,869 = 0.78%. Comparing this with the debt ration of Sunnyvale which was