HCFM_11.5__11.6 - 11.5 Brandywine Clinic a not-for-profit business had revenues of $12 million in 2012 Expenses other than depreciation totaled 75

HCFM_11.5__11.6 - 11.5 Brandywine Clinic a not-for-profit...

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11.5 Brandywine Clinic, a not-for-profit business, had revenues of $12 million in 2012. Expensesother than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million. All revenues were collected in cash during the year, and all expenses other than depreciation were paid in cash. a.Construct Brandywine’s 2012 income statement. Total revenues $12 millionExpenses Other than depreciation $9 millionDepreciation $1.5 millionTotal Expenses $10.5 millionNet income $1.5 millionb.What were Brandywine’s net income, total profit margin, and cash flow? Net income: $12 million - $9 million - $1.5 million = $1.5 millionTotal profit margin: $1.5 million / $12 million = 0.125 or 12.5%Cash flow: $1.5 million + $1.5 million = $3 millionc.Now, suppose the company changed its depreciation calculation procedures (still within GAAP) such that its depreciation expense doubled. How would this change affect Brandywine’s net income, total profit margin, and cash flow? Net income: $12 million - $9 million - $3 million = $0Total profit margin: 0 / $12 million = 0 or 0%
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