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C04252 Pharmacy Question: Discuss about the Pharmacy, Ideal debt asset ratio must be less than 1. In this case Pharmacy’s Debt-asset ratio was 0.9 which means pharmacy has more assets than its liability. In other words, we can say that liabilities can be pay off easily by selling of its assets. Answer: The standards set for the salary and wages was 13.04%. In the year 2016-17, salary and wages was amounting to 12.7% whereas in the year 2017-18, the same was 10%. There was a declination in salary and wages by 2.7% due to increment in the total turnover. Due to the increment in the total revenue of pharmacy’s, the gross margin has decreased. The reason for the boost in the sales was mainly due to pharmacy swelling its team fellows (i.e. 2016-17 = $ 460, 769 and 2017-18 = $ 506, 846).   The standards set for staff training was 0.9% and for the marketing expense it was 0.55%. In the year 2016-17, the ratio for staff training was 0.5% and for marketing expenses the ratio was 1.47% and in the year 2017-18, the ratio for staff training was 0.42% and for marketing expenses the ratio was 1.17%. Both the ratios have decreased in 2017-18. These ratios should be at least kept at the same level with that of the previous year (2016-17) because these are most significant constituents for the boost in the profit margins. The marketing expenses and the training of staff are the most important to the pharmacy business. Monetary Presentation Asset Turnover Ratio The asset turnover ratio was 2.78 which simply indicates that the turnover rise by $2.78, with the expenditure of $1 on asset. This means that the company is producing gains with the amount that has been invested in the asset.   Gross margin returns on inventory investments The standards set for GMROII was 4.49. In 2016-17, the GMROII was 3.91% whereas in 2017-18, it was 3.65%. The method for the increment in GMROII is to reduce stock or to increase the profit. Operational Effectiveness The standards set for Stock turnover ratio was 7.35 days. In 2016-17, the stock turnover ratio was 9.12 days whereas in 2017-18 the ratio was 14.59 days. This simply directs that stock management is very pitiable from the pharmacy. The reason for the unfortunate stock management is wholesale buying of stuffs at an economy price. Account Receivable Turnover Ratio In 2017-18, the account receivable turnover ratio is 5.57 which means average days for a customer to pay their debts is 65.6 days (365/5.57). This simply directs that the customer takes 66 days to pay off their debts which is not a best condition and it needs the consideration because it slows down the cash flows. Also an interest rate of 5% is charged if the debts not paid within 28 days from the transaction date. Monetary Firmness Measure of short-term solvency Current Asset Ratio According to QUT financial management, the current asset ratio must be in the range between 2-6. Hence in this case, current asset ratio is 2.84 which is apt. Quick Asset Ratio In this case the quick ratio is 1.16 which means that the pharmacy store has sufficient liquid assets and can be converted into cash to pay off its current debts. Measure of long term solvency Debts to Asset ratio Ideal debt asset ratio must be less than 1. In this case Pharmacy’s Debt-asset ratio was 0.9 which means pharmacy has more assets than its liability. In other words, we can say that liabilities can be pay off easily by selling of its assets. Margin of Safety Breakeven Point (BEP) The formula for Breakeven point (BEP) is Sales LessCost of goods sold less The standards set for BEP is $ 175, 152 whereas the pharmacy’s BEP is $ 148, 474 which is very close. Margin of Safety Ratio (MOS) The standards set for Margin of safety (MOS) is 16.31 whereas the pharmacy’s MOS is 9.23 which directs that margin needs to increase by reduction in breakeven sales. Sales to Breakeven Ratio Pharmacy’s Sales to Breakeven ratio is 1.03. Conferring to financial management, business is more vulnerable to profitable condition as the ratio is close to 1. The ratio must be more than 1 and this can be achieved by lowering in expenses or cost of goods sold. Inventory Management The core problem with the Sunny day’s pharmacy is the pitiable inventory management and the reason was the increment of COGS. This affects the gross margin and will more hamper profitability if ignored. Below are some propositions: Better inventory manager is required for Sunny Day’s pharmacy who will keep the products with high margins. Wholesale buying of products at cheaper rates only if high stock turn over. Only keep chosen brands for the stuffs. Offer more direct metres to products that have a greater gross margins. Reduce stock by putting them on a clearance sale and make spaces for more gainful inventory. Keep the chosen brands in the mark zone on the shelves/tables. Make spaces by removing 3-4 refrigerators and keep only 1 refrigerator this will help in reducing power and also ensure to remove soft drinks with juices, water etc. to endorse health and wealth. Reduce varieties of brands and make spaces for the customer chosen brands.

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