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BME Luxury Care Home Case Study

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.  blankThe 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)blankTask 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.

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