Financial Analysis in Pharmacy Practice (Pharmaceutical Business Administration Series) PDF
Preview Financial Analysis in Pharmacy Practice (Pharmaceutical Business Administration Series)
ResearchMethodsforPharmaceuticalPracticeandPolicy ChapterNo. Dated:1/6/2011 AtTime:11:23:44 Financial Analysis in Pharmacy Practice ResearchMethodsforPharmaceuticalPracticeandPolicy ChapterNo. Dated:1/6/2011 AtTime:11:23:44 Introduction to the Pharmaceutical Business Administration Series BooksinthePharmacyBusinessAdministrationSerieshavebeenpreparedfor useinuniversitylevelgraduateandprofessionallevelcourses,aswellasfor continuingeducationandself-studyuses.Theseriesincludesbookscovering the major subject areas taught in Social and Administrative Pharmacy, PharmacyAdministration,andPharmacyMBAprograms. World-classauthorswithwell-regardedexpertiseinthevariousrespective areashavebeenselectedandthebookoutlinesaswellasthebooksthemselves havebeenreviewedbyanumberofotherexpertsinthefield.Theresultofthis effortisanewintegratedandcoordinatedseriesofbooksthatisuptodatein methodology,research findings,terminology,andcontemporarytrends and practices. Thisisonebookinthatseriesofabout10subjectsintotal.Itisintended that each of the books will be revised at least every 5 years. Although the bookswereintendedfortheNorthAmericanmarket,theyarejustasrelevant inotherareas. Titlesintheseriescurrentlyinclude: HealthEconomics HealthPolicyandEthics PrinciplesofGoodClinicalPractice ResearchMethodsforPharmaceuticalPracticeandPolicy FinancialAnalysisinPharmacyPractice The series editor-in-chief isProfessor Albert Wertheimer, PhD, MBA, of TempleUniversitySchoolofPharmacy,Philadelphia,Pennsylvania,USA. ResearchMethodsforPharmaceuticalPracticeandPolicy ChapterNo. Dated:1/6/2011 AtTime:11:23:44 Financial Analysis in Pharmacy Practice Keith N Herist PharmDCPA AssociateProfessor,ClinicalandAdministrativePharmacy, UniversityofGeorgiaCollegeofPharmacy,Athens,Georgia,USA Brent L Rollins RPh,PhD AssistantProfessor,PharmacyPractice,PhiladelphiaCollegeofOsteopathic Medicine–GeorgiaCampus,SchoolofPharmacy,Suwanee,Georgia,USA Matthew Perri III RPh,PhD Professor,ClinicalandAdministrativePharmacy,UniversityofGeorgia CollegeofPharmacy,Athens,Georgia,USA FinancialAnalysisinPharmacyPractice ChapterNo.9 Dated:31/5/2011 AtTime:15:3:18 PublishedbyPharmaceuticalPress 1LambethHighStreet,LondonSE17JN,UK 1559St.PaulAvenue,Gurnee,IL60031,USA (cid:1)PharmaceuticalPress2011 isatrademarkofPharmaceuticalPress PharmaceuticalPressisthepublishingdivisionofthe RoyalPharmaceuticalSocietyofGreatBritain Firstpublished2011 TypesetbyThomsonDigital,Noida,India PrintedinGreatBritainbyTJInternational,Padstow,Cornwall ISBN9780853698975 Allrightsreserved.Nopartofthispublicationmaybereproduced, storedinaretrievalsystem,ortransmittedinanyformorbyanymeans, withoutthepriorwrittenpermissionofthecopyrightholder. Thepublishermakesnorepresentation,expressorimplied, withregardtotheaccuracyoftheinformationcontainedinthisbook andcannotacceptanylegalresponsibilityorliabilityforanyerrorsor omissionsthatmaybemade. TherightofKeithNHerist,BrentLRollinsandMatthewPerritobeidentifiedas theauthorsofthisworkhasbeenassertedbytheminaccordancewiththeCopyright, DesignsandPatentsAct,1988. Suggestionsandcommentsfromreadersaremostwelcomeandshouldbesentto Commissioning Editor, Pharmaceutical Press, 1 Lambeth High Street, London SE1 7JN,UK. AcataloguerecordforthisbookisavailablefromtheBritishLibrary. FinancialAnalysisinPharmacyPractice ChapterNo. Dated:31/5/2011 AtTime:15:30:41 Contents Preface xi Abouttheauthors xiii 1 Introduction 1 Importanceoffinancialanalysisandmanagementforpharmacists 1 Impactoffinancialanalysisandmanagementoncustomerservice 2 Importanceofaccountingtoallbusinessesandpharmacies 7 Overviewofthisbook 7 2 Understandingtheguidingprinciplesofaccounting 15 Introduction 15 Historyofaccounting 16 Introductiontofinancialstatements 17 Managerialreporting 18 Balancesheet(real)andincomestatement(nominalaccounts) 18 Cashandaccrualbasisofaccounting 20 Definitionofaccounting 21 Transactionanalysis 21 Accountingentityprinciple 22 Goingconcernprinciple 23 Accountingperiodprinciple 24 Historicalcostprinciple 25 Objectivityprinciple 25 Conservatismprinciple 26 Consistencyprinciple 26 Matchingprinciple 26 Materialityprinciple 28 Revenuerecognitionprinciple 29 FinancialAnalysisinPharmacyPractice ChapterNo. Dated:31/5/2011 AtTime:15:30:41 vi | Contents Accountingsystemsandinternalcontrol 30 Basiclegalstructures 31 Summary 34 References 34 Suggestedreading 34 Reviewquestions 35 Glossary 38 3 Fromdetailedtransactionstosummaryreports 43 Introduction 43 Transactions 43 Accountingequation 45 Expandedaccountingequation 47 Goodwill 50 Double-entryaccounting 51 Debitsandcredits 52 Postingofaccountsandjournals 53 Generaljournalandledger 54 Trialbalanceandgeneralledger 55 Taccounts 57 Summary 58 Suggestedreading 58 Reviewquestions 58 Glossary 61 4 Financialstatements 63 Introduction 63 Internalusers 64 Externalusers 64 Fourbasicfinancialstatements 65 Balancesheet 65 Liabilitiesandshareholder'sequity 70 Incomestatement 72 Revenues 73 Expenses 74 Statementofshareholder's(owner's)equity 75 Statementofcashflows 76 Summary 85 FinancialAnalysisinPharmacyPractice ChapterNo. Dated:31/5/2011 AtTime:15:30:41 Contents | vii Suggestedreading 85 Reviewquestions 85 Glossary 89 5 Basicsoffinanceandfinancialanalysis 91 Introduction 91 Timevalueofmoney 92 Interest 92 Comparativefinancialstatementanalysis 96 Ratioanalysis 100 SelectedSamplePharmacyliquidityratios 102 Uniquepharmacyratios 105 Othertypesoffinancialanalysis 107 Summary 107 Suggestedreading 108 Reviewquestions 108 Glossary 114 6 Financialaspectsofinventorymanagement 117 Introduction 117 Cashconversioncycle 118 Basicinventorycosts 119 Inventoryrecordkeepingmethods 124 Inventoryvaluationmethods 127 Managinginventoryturnover 130 Otherinventorycontroltechniques 132 Optimizinginventorydecisions 134 Summary 134 Suggestedreading 135 Reviewquestions 135 Glossary 138 7 Budgeting 141 Introduction 141 Budgettypes 142 Budgetdevelopment 144 Businessperformanceevaluation 147 Employees,budgets,andmotivation 148 FinancialAnalysisinPharmacyPractice ChapterNo. Dated:31/5/2011 AtTime:15:30:41 viii | Contents Budgetingforpharmacyservices 148 Advantagesanddisadvantagesofbudgeting 152 Summary 153 Suggestedreading 153 Reviewquestions 154 Glossary 157 8 Pricinggoodsandservices 159 Introduction 159 Prescriptionpricing 160 Pricinginformationsources 161 Productpricingstrategies 161 Costidentification 165 Cost-volumeprofitandbreak-evenanalysis 166 Relevantcostsofdispensing 168 Costofdispensing 168 “SamplePharmacy”example 168 Totalcosts 172 Profits 173 Inventory 173 Prices 173 Comprehensivepricestrategy 174 Cashprescriptionpricing 175 Pricingcategories 175 Pricingpharmaceuticalcare/cognitiveservices 176 Over-the-counterpricing 177 Summary 179 References 179 Suggestedreading 179 Reviewquestions 180 Glossary 183 9 Personalfinancialmanagement 185 Introduction 185 Settingpersonalfinancialgoals 186 Creatingahomebudget 187 Borrowingandcredit 190 Majorinvestmentclasses 193 FinancialAnalysisinPharmacyPractice ChapterNo. Dated:31/5/2011 AtTime:15:30:41 Contents | ix Cash 194 Bonds 195 Stocks 197 Investmentstrategies 200 Incomeandinvesting 203 Retirement 205 Insurance 209 Professionaladvice 209 Summary 210 Disclaimer 210 References 210 Suggestedreading 210 Reviewquestions 211 Glossary 214 Index 219
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