Question
ABC Pharmacy - What can two new pharmacy owners learn about their business from its financial statements? It has been a little more than two
ABC Pharmacy - What can two new pharmacy owners learn about their business from its financial statements?
It has been a little more than two years since Angela Ramirez and Martin Bull purchased the ABC Pharmacy from Frank Strand, the previous owner and founder, who started the pharmacy in 1963. The two had spent many long hours in the store and had learned many valuable lessons as business owners that they had not had the opportunity to learn as employees of large chain pharmacies where they had previously worked.
Ramirez and Bull just received an e-mail from their accountant that contained the balance sheet and the in the income statement for ABC Pharmacy for the fiscal year that had just ended. The financial statements appear below.
Balance Sheet, December 31, 2013 | |
Assets | |
Current Assets | |
Cash | $74,473 |
Accounts receivable | $112,730 |
Inventory | $224,870 |
Supplies | $21,577 |
Other assets | $10,202 |
Total Current Assets | $443,852 |
Fixed Assets | |
Autos, net | $33,156 |
Equipment, net | $35,706 |
Furniture and fixtures, net | $16,323 |
Total Fixed Assets | $85,185 |
Total Assets | $529,037 |
Liabilities | |
Current Liabilities | |
Accounts payable | $29,585 |
Notes payable | $70,902 |
Line of credit payable | $32,136 |
Total current liabilities | $132,623 |
Long-Term Liabilities | |
Note payable | $170,880 |
Loan | $93,346 |
Total long-term liabiities | $264,226 |
Owner's Equity | |
Ramirez and Bull, capital | $132,187 |
Total liabilities and owner's equity | $529,036 |
Income Statement December 31, 2013 | ||
Sales Revenue | ||
Prescription sales revenue | $2,228,767 | |
All other sales revenue | $167,757 | |
Total Sales | $2,396,524 | |
Cost of Goods Sold | ||
Beg. Inventory, 1/1/2013 | $169,578 | |
Purchases | $1,938,097 | |
Goods available for sale | $2,107,675 | |
Ending Inventory, 12/31/2013 | $224,870 | |
Cost of Goods sold | $1,882,805 | |
Gross profit | $513,719 | |
Operating Expenses | ||
Utilites | $10,305 | |
Rent | $35,948 | |
Advertising | $9,586 | |
Insurance | $9,586 | |
Depreciation | $5,033 | |
Salaries and benefits | $321,134 | |
Computer and e-commerce | $11,983 | |
Repairs and maintenance | $28,758 | |
Travel | $4,793 | |
Professional fees | $3,595 | |
Supplies | $5,991 | |
Total operating expenses | $446,712 | |
Other Expenses | ||
Interest Expense | $24,879 | |
Misc. expenses | $374 | |
Total other expenses | $25,253 | |
Total expenses | $471,965 | |
Net Income | $41,754 | |
To see how their pharmacy
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