All-Care Health Agency CASE DESCRIPTION

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PART II: CASE DESCRIPTION

All-Care Health Agency. You are the assistant accounting manager for All-Care Health Agency. The accounting manager position is available and you have applied for this position. You are tasked with developing a cash budget and a pro-forma (projected) statement of operations for the next six months. You want to do your best to impress the president of All-Care Health Agency.
PART II: PROJECT INSTRUCTIONS
Cash Budget:
A. Prepare a cash budget for the All-Care Home Health Agency for the months of April
through September using the information below.
Final Project
Healthcare Finance

All-Care Health Agency CASE DESCRIPTION

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• The March 31 cash balance is $260,000 and the company wants to maintain a minimum cash
balance of $250,000 at the end of each month. All-Care’s activity varies by the season because
of the number of summer homes that are located in their service area.
• Projected revenues from patient care are:
Month Projected
Revenues

All-Care Health Agency CASE DESCRIPTION

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January $650,000
February $680,000
March $700,000
April $700,000
May $780,000
June $820,000
July $900,000
August $950,000
September $840,000
October $750,000
November $720,000
December $700,000
• All-Care collects 40% of the revenue in the month of service, 30% the next month, and 25% in
the following month. They fail to collect 5% of their billed revenue because of bad debts and
other factors.
• The company’s expected monthly expenditures for expenses are:
• Payroll = $60,000 per month plus 50% of monthly revenue
• Supplies and travel = 15% of monthly revenue
• Rent, utilities, and miscellaneous expenses = $55,000 per month
• All-Care must pay $250,000 on its long-term debt in May.
Final Project
Healthcare Finance

All-Care Health Agency CASE DESCRIPTION

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• They plan to make a capital expenditure of $80,000 in June.
• Your cash budget should indicate which months the company can invest surplus funds and
which months they need to borrow against their flexible line of credit.
• Interest expense can be ignored.
B. Prepare a 2-page rationale for your budget which includes at least 3 strategies for
improving the company’s cash position. (CO2, CO4)
Pro forma Statement of Operations
A. Prepare a pro forma (projected) statement of operations for the six-month period of April through September.
B. Assume depreciation expense of $85,000 is equal to one half annual depreciation
expense.
C. For purposes of simplicity, you should ignore interest expense and use 5% of
the revenue generated from April through September as the bad debt
expense for that 6-month period. (CO2)
D. Write a one-page memo to the company president explaining the company’s
financial situation. (CO2)