Financial management in selected Oregon pharmacies Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/5999n5874

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  • Every activity of a pharmacy is related in some measure to the financial results of the business. The need for sound financial management permeates almost every phase of pharmacy operations. Pharmacy bankruptcies were at a 20-year high in 1961. The lack of specific literature on pharmacy financial management, especially at the state level, was instrumental in provoking this study. The failure record of pharmacies, the lack of published literature, and the decreasing profit margin indicates a need for more study in this aspect of management. The purpose of this study was to determine the extent and by what methods Oregon pharmacy owners plan and control their financial operations. A secondary purpose was to determine what effect, if any, sales volume, form of ownership, and type of store have upon their financial management and operating results. Finally, this study was conducted to determine the depth and breadth of academic background preparation of the pharmacy owners and their opinions on its adequacy in preparing them for the role of a business manager. The procedure employed to obtain the data in this study was a personal interview, guided by a questionnaire, with 24 selected pharmacy owners in the state of Oregon during the summer of 1961. An income statement and balance sheet was requested at the time of the interview. All data was codified to eliminate bias on the part of the author in his analysis, Over-one-third of the selected Oregon pharmacies suffered a loss in total sales volume during 1961. Nevertheless, the aggregate sample experienced 3.8% gain. Prescription sales accounted for 42.6% of the sales for the selected pharmacies. The neighborhood pharmacies derived the least sales from prescription but a high percentage of nonprescription sales. There was a definite relationship between the type of pharmacy and their distribution of sales and inventories. The total inventory represented approximately 20% of sales. The nonprescription inventory was the most difficult to control. Other results obtained indicate that leasing of building and land for the pharmacy was utilized extensively as a means of financing. Also, owner's investment and personal notes to previous owners were the most frequent sources of original capital for these pharmacies. The pharmacies were well protected with insurance coverage, except for business interruption and executive life insurance. Ninety-two percent of the pharmacies extended credit to their customers on a regular basis, This study demonstrated that the pharmacy owners were passive in their financial management, especially as it pertains to bookkeeping, records, and methods of financial control. There was a distinct lack of budget control. Nevertheless, the earning power and return on owner's investment for the Oregon pharmacies was 12 to 15% above national average despite a current ratio almost twice the national average, The results also indicate that the pharmacy owners lacked adequate academic background preparation for business management. The owners themselves, readily recognized this deficiency, An inverse relationship was found between total sales and gross margin, as was true for net operating income as a percent of sales.
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