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Financial Analysis Of Brandywine Homecare's 2011 Performance And Depreciation Policy Impact

Evaluate financial performance with this homework solution.

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Financial Analysis of Brandywine Homecare's 2011 Performance andDepreciation Policy ImpactA.BrandywineHomecare, not for profit business, had revenues of $12 million in 2011. 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 werepaid in cash1.What is Brandwine 2011 net incomeThe net income of Brandywine in 2011 is $ 12 million * (1-0.75)–$1.5 million (depreciationexpenses) = $1.5 million2. Whats Brandywine 2011 total profit marginThe total profit margin of the company is : net income/total revenues = $1.5 million/$15 million =0.125 = 12.5%3. Whats Brandywine 2011 cash flowThe cash flow of the company is : $1.5 million (net income) + $1.5 million (depreciation expenses) =$3 millionB. Now, supposed 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, cash flow.1.What would be his net income’If its depreciation expense doubles, we have then as net income : $ 12 million * (1-0.75)–$3 million(depreciation expense) = $0 million. Therefore there would be decrease of $1.5 million of thecompany net income.2.What would be his total profit marginIf its depreciation expense doubles, we have then as total profit margin : $0 million/$12 million = 0% :therefore there would be a decrease of $1.5 million of the total profit margin of the company.3.What would be cash flowIf its depreciation expense doubles, we have then as cash flow : $0 million + $3 million = $3 million.There would be no change in cash flow.C. Supposed the change had halved, rather than doubled, the firm’s depreciation expense. Now,would be his net income , what would be his total profit margin and what would be his cash flowIf the depreciation expense are $1.5 million/2 :

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