BME Luxury Care Home Case Study
Read the following case study and answer all the questions that follow.
As a manager of BME Luxury Care Home – a registered business operating in England, the directors have asked you to consider the viability of investing in a privately owned and managed nursing home. This is of course led by an ever-increasing demand for such services among an aging population in England. The mission statement is: “a commitment to excellence in long-term support and care”. The plan is to, expand over time, to a network of at least five luxury facilities in London.
The vision of the directors is to achieve the highest possible level of person-centred care in a home-like environment. Long-term care includes medical and non-medical care for individuals who need support with their activities of daily living. Many of the service users would be self-funding but some would be eligible for social care funding. Users may have a range of complex needs and/or disability that may challenge their ability to carry out certain activities of daily living. 
The financial statements for the care home facility are summarised below:
|
|
BME Luxury Care Home
Balance Sheet Year Ended December 31, 2017 |
| Assets
Current Assets: Cash and cash equivalents |
£105,737 |
| Investments | £200,000 |
| Net patient accounts receivable | £215,600 |
| Supplies | £87,655 |
| Total current assets | £608,992 |
| Property and
equipment |
£2,250,000 |
| Less accumulated depreciation | £356,000 |
| Net property and equipment | £1,894,000 |
| Total
assets |
£2,502,992 |
|
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 |
| Shareholders’ Equity:
Shares, £10 par value |
£100,000 |
| Retained earnings | £257,842 |
| Total shareholders’ equity | £357,842 |
| Total liabilities and shareholders’ equity | £2,502,992
|
Task 1:
Prepare a 1500-word internal memorandum for the directors of the care home, critically discussing the advantages and disadvantages of at least two strategic planning models appropriate to the care sector in England. The directors expect a recommendation as to which model you propose for business growth and why? (1500 words) (35 marks) (LO1)Task 2:
The word count for 2a and 2b should not exceed 1000 words in total.
1. Briefly discuss the usefulness of a Du Pont analysis to shareholders and then apply it to BME Luxury Care Home using the financial statements above as a basis for your calculations. You must discuss the purpose of each formula, and each step in your calculations to make sure you have not made any errors.
Discuss your findings in the context of the following industry averages:
Total margin 3.5%
Total asset turnover 1.5
Equity multiplier 2.5
Return on equity (ROE) 13.1% (10 marks)
1. Calculate and interpret the following ratios. You must explain the purpose of each formula, and each step in each calculation. Discuss your findings in the context of the following industry averages
Return on assets (ROA) 5.2%
Current ratio 2.0
Days cash on hand 22 days
Average collection period 19 days
Debt ratio 69%
Debt-to-equity ratio 2.5
Fixed asset turnover ratio 1.4 (10 marks)
(1000 words) (20 marks) (LOs 2 & 3)
Task 3:
Critically evaluate the use of non-financial and multidimensional models of performance management in preparation for a discussion with your management team. Choose the Balanced Scorecard or the Performance Pyramid as a basis for your discussion. (1500 words) (35 marks) (LO4 & GA)
NOTE: Your final submission must include all three questions (with calculations) in a SINGLE document in MS Word or as an Adobe Acrobat .pdf document.
Ten additional marks are allocated for presentation, referencing and academic writing.