Columbia Needycare is a clinic in south Florida that provides basic medical care for homeless and indigent patients. The clinic is a nonprofit organization that receives revenue from however much patients can pay at the time of their visit. These revenues totaled $5 million in 2017. The clinics expenses, other than its depreciation, totaled 70% of its revenues. The depreciation expenses were $1 million. Other than depreciation, the clinic pays all of its expenses with cash because all of its revenues are collected in cash. Based on this information, complete the following items for Part I of the case study.
Develop an income statement for Columbia Needycare for 2017.
Calculate the total profit margin and net income for the clinic.
Explain the difference between gross income and net income.
For Part II of this case study, suppose that the clinic has an opportunity to purchase an additional building in another part of the city to help more patients. The new building will cost $480,000, but it will also need $35,000 in renovations. Based on this information, answer the following questions:
Can the clinic afford to purchase and renovate the new facility?
Do you have enough information to make this decision? If so, how would you recommend that the clinic handle the financing for purchasing and renovating the facility? If no, what additional information would clinic managers need to make this decision?