1. Calculate the twelve ratios for Bluffton Pharmacy for this year. (Chapter 12, LO 3)
(AACSB: Application of knowledge)
2. How do the ratios you calculated for this year compare to those for the pharmacy last
year? What factors are most likely to account for those changes? (Chapter 12, LO 3)
(AACSB: Application of knowledge)
The ratio comparisons reveal the following:
Liquidity
The Current Ratio is below that of last year.
The Quick Ratio has decreased from last year. Both the liquidity ratios have declined
from last year.
Leverage Ratios
The Debt Ratio is slightly higher than last year.
The Debt-to-Net Worth Ratio is higher than last year.
The Times Interest Earned Ratio is slightly less than last year. All three indicate an
increase in debt and a decrease in debt service ability from last year.
Net Profit to Assets Ratio is down from last year.
Net Profit to Equity Ratio is up from last year. While ROE has improved, the other
profitability ratios have gone down.
Downward trends from last year’s performance exist in the areas of leverage, operations, and
profitability. Another significant concern is an increase in the collection period. This may be
a sign of future difficulties with customers paying late.
Liquidity shows a declining trend and is also a cause of concern.
3. How do the ratios you calculated for this year compare to those of the typical company in
the industry? Do you spot any areas that could cause the company problems in the future?
Explain. (Chapter 12, LO 3) (AACSB: Application of knowledge)
In summary the year–to-year trends and comparisons to industry ratios reveal the following:
4. Develop a set of recommendations for improving the financial performance of Bluffton
Pharmacy using the analysis you conducted in questions 1-3. (Chapter 12, LO 3) (AACSB:
Application of knowledge)
Case 7: Bluffton Pharmacy, Part 2
Related Chapters:
Chapter 13: Managing Cash Flow
1. Develop a monthly cash budget for Bluffton Pharmacy for the upcoming year. (Chapter
13, LO 3) (AACSB: Application of knowledge)
2. What recommendations can you offer Angela Crawford and Martin Crawford to
improve their pharmacy’s cash flow? (Chapter 13, LO 3) (AACSB: Application of
3. If you were Bluffton Pharmacy’s banker, would you be comfortable extending a line of
credit to the pharmacy? Explain.
Bluffton Pharmacy”s Next Year Cash Budget
November
December
January
February
April
May
June
July
August
September
October
November
December
Sales
$272,357
$315,458
$230,402
$237,915
$177,810
$175,306
$172,801
$162,784
$167,793
$197,845
$247,932
$255,445
$262,959
$
Credit Sales
$215,162
$249,212
$182,017
$187,953
$140,470
$138,492
$136,513
$128,599
$132,556
$156,298
$195,867
$201,802
$207,737
$
Cash
Receipts
Collections
Same Month
$20,022
$20,675
$15,452
$15,234
$15,016
$14,146
$14,581
$17,193
$21,545
$22,198
$22,851
Next Month
$158,250
$115,581
$119,350
$108,043
$89,198
$87,942
$86,686
$81,661
$84,173
$99,249
$124,375
$128,144
$
Two Months
$47,336
$54,827
$41,350
$37,432
$30,903
$30,468
$30,033
$28,292
$29,162
$34,385
$43,091
Cash Sales
$48,384
$49,962
$37,340
$36,814
$36,288
$34,185
$35,236
$41,547
$52,066
$53,644
$55,221
Other Cash Receipts
105
55
75
85
55
65
60
65
85
95
110
Total Cash Receipts
$274,096
$241,100
$202,260
$178,764
$170,205
$165,549
$161,571
$171,270
$202,107
$234,698
$249,417
$
Monthly Purchases
$210,804
$244,164
$178,331
$166,701
$137,625
$135,687
$133,748
$125,995
$129,871
$153,132
$191,900
$197,715
$
Cash Disbursements
Purchases
$244,164
$178,331
$166,701
$137,625
$135,687
$133,748
$125,995
$129,871
$153,132
$191,900
$197,715
$
Rent
$3,083
$3,083
$3,083
$3,083
$3,083
$3,083
$3,083
$3,083
$3,083
$3,083
$3,083
Utilities
$1,049
$1,083
$809
$798
$787
$741
$764
$901
$1,129
$1,163
$1,197
Advertising
$1,150
$1,188
$888
$875
$863
$813
$838
$988
$1,238
$1,275
$1,313
Insurance
$0
$0
$0
$0
$2,700
$0
$0
$2,700
$0
$0
$2,700
Salaries, Wages, and
Benefits
$27,404
$27,515
$26,627
$26,590
$26,553
$26,405
$26,479
$26,923
$27,663
$27,774
$27,885
Computer System and E-commerce
$1,042
$1,042
$1,042
$1,042
$1,042
$1,042
$1,042
$1,042
$1,042
$1,042
$1,042
Repairs and Maintenance
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
Travel
$0
$0
$0
$5,000
$0
$0
$0
$200
$0
$0
$0
Professional Fees
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$3,900
Supplies
$644
$665
$497
$490
$483
$455
$469
$553
$693
$714
$735
Loan
Payments
$2,073
$2,073
$2,073
$2,073
$2,073
$2,073
$2,073
$2,073
$2,073
$2,073
$2,073
Other
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Total Cash Disbursements
$282,610
$216,980
$203,720
$179,576
$175,270
$170,360
$162,742
$170,334
$192,052
$231,024
$243,643
$
Beginning Cash Balance
$74,473
$65,960
$88,445
$86,985
$86,172
$81,108
$76,297
$75,126
$76,062
$86,117
$89,791
+ Cash Receipts
$274,096
$241,100
$202,260
$178,764
$170,205
$165,549
$161,571
$171,270
$202,107
$234,698
$249,417
-Cash Disbursements
$282,610
$216,980
$225,034
$203,720
$179,576
$175,270
$170,360
$162,742
$170,334
$192,052
$231,024
$243,643
EOM Balance
$65,960
$90,080
$88,445
$86,985
$86,172
$81,108
$76,297
$75,126
$76,062
$86,117
$89,791
$95,566
Borrow
$ –
$ –
$ –
$ –
$ –
$ –
$ –
$ –
$ –
$ –
$ –
Repay
$ –
$ –
$ –
$ –
$ –
$ –
$ –
$ –
$ –
$ –
Final EOM Balance
$65,960
$90,080
$86,985
$86,172
$81,108
$76,297
$75,126
$76,062
$86,117
$89,791
$95,566