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80 Cards in this Set

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What are the 3 major stages of financial analysis
1 Preparation
2-Computation/Interpretation
3-Evaluation
What is financial preparation?
The conceptualization of the objectives of the manager in terms of finance.

Present financial statements and data in clear fashion
Name the different types of financial statements.
1-Income Statements
2-Balance Sheet
3-Funds Flow Statements
What is a balance sheet statement?
Its gives a picture of the practice at ONE point in time.
Define Assets
Assets= Liabilities + Owner's Equity

*Resources that the company has control over (Value any asset will start out being the cost of the asset to us)

*Provides future benefit

*Objectively valued
What are the two types of assets?
1- Current
2- Fixed
Define a Current asset
Items that become cash or are consumed or sold with-in one year.

Ex- cash, marketable securities, accounts receivable, and inventory.
What is the biggest cause of financial loss
Accounts receivable ( total dollars that someone(s) owes you)
Define Fixed Assets
Assets with a useful life of more than one year (these can depreciate)

Ex: property, plant, and equip
What are Liabilities?
What we owe to other parties

-claims by nonowners against the assets of the firm (claimed against our assets)
What are the types of liabilities
1-current
2-long term
What is a current liability?
Those accounts that are usually due within one year

ex-accounts payable, short term notes payable, accruals, or existing obligations that have not been paid
What is an account payable?
everyday accounts that we have to pay (ex inventory)
What is an accrual?
it is associated with an expense for operations that haven't been paid (maintenance bills, etc)
What are short term notes payable?
Borrowed money, gen unsecured; that is promised to pay with in a certain number of days
What is a funds flow statements?
Take select portions of income statements and balance sheets and watch how cash flows in and out of the practice
What is an Income statement?
A statement of profit and loss

Aka operations statement
What is a long term liability?
Items usually due within a period greater than one year

ex- bonds payable, mortgages, long term notes payable
What is owner's equity?
aka net worth

It is the claim by owners against assets. It will change when the owner invests money into the practice.

Owner's interest in all assets after all liabilities are paid

Ex- direct investments by the firm's owner plus undistributed profits
What is the equation for net profit
Net Sales
-Cost of Goods Sold
=Gross Margin
-Total Expenses
=Net Profit
What is Gross Sales
What comes into the pharmacy as a result of transfers of goods and services
What is the equation for net sales?
Gross Sales
-Allowances
+Returns
=Net Sales
What is the equation for cost of goods sold?(CGS)
beginning inventory
+purchases
-discounts
+delivery in
-ending inventory
=CGS
What is the largest expense in pharmacy?
Salary and Wages
What is Cost of Goods Sold (CGS)?
describes the direct expenses incurred in producing a particular good for sale, including the actual cost of materials that comprise the good, and direct labor expense in putting the good in salable condition. Cost of goods sold does not include indirect expenses such as office expenses
What questions are illegal to ask during an interview? (13)
1-How old are you?
2-Are you married?
3- Do you have any children and how old are they?
4-How will you care for your children during work hours?
5- What is your religion?
6-Do you receive alimony or child support?
7- What is your race?
8- Are you Pregnant?
9- Send in a picture with your job application
10- How much do you weigh?
11- What is your maiden name/ fathers surname?
12- Where were you born?
13- What clubs do you belong to?
What is a professional?
someone with specialized education, code of ethics, licensure, CEs
Why are professionals different?
they have autonomy, they are problem solvers, and they are decision makers
What are the four sequential steps in planning activities?
1- Job analysis
2- Job Description
3- Job Specification
4- Job Evaluation
What is Job analysis?
Job analysis is a systematic investigation that collects all information pertinent to each task performed by an employee. From this analysis, you identify the skills, knowledge and abilities required of that employee, and determine the duties, responsibilities and requirements of each job.
What should the Job analysis include?
Job title.
Department.
Supervision required.
Job description -- major and implied duties and responsibilities.

Unique characteristics of the job including location and physical setting.

Types of material used.
Types of equipment used.
Qualifications
Experience requirements.
Education requirements.
Mental and physical requirements.
Manual dexterity required.

Working conditions (inside, outside, hot, cold, dry, wet, noisy, dirty, etc.).
What is a Job Description?
The job analysis is used to generate a job description, which defines the duties of each task, and other responsibilities of the position. The description covers the various task requirements, such as mental or physical activities; working conditions and job hazards. The approximate percentage of time the employee should spend on each activity is also specified. Job descriptions focus on the what, why, where and how of the job.
What is a Job Specification?
The job specification describes the person expected to fill a job. It details the knowledge (both educational and
experiential), qualities, skills and abilities needed to perform the job satisfactorily. The job specification provides a standard against which to measure how well an applicant matches a job opening and should be used as the basis for recruiting.
What are the methods of recruitment?
1- Word of Mouth
2- Advertisements
3- School Recruiting
4- Independent Agencies
What are the steps in the selection process?
1- Choose information needed from Job specifications
2- Use Applications
3- Check References
4- Conduct Interviews
How should an interview be organized?
1- Introduction
2- Structure
3- Body
4- Influence and Sell
5- Summary
What are some reasons for employee termination?
1- Unsatisfactory Job Performance
2- Theft
3- Insubordination
4- Disorderly Conduct
What are the three types of management styles?
1 Bureaucratic
2- Likert
3- McGregor
Explain the characteristics of the Bureaucratic style of management
1- Hierarchy
2- Rigid Management
3- Impersonal
4- Rules
5- Formal Levels of responsibility

ex- Military
Explain the four Likert styles of management. Which is preffered?
1- Exploitive- Authoritative
(motivated by threats, and top driven responsibility)
2- Benevolent/Authoritative
(master/servant trust, motivated by rewards)

3- Consultative
(Motivated by rewards, sharing of responsibility with subordinates, communication (vertically and horizontally), concept of teamwork)

4- Participative Group
(Optimum style)
What are the two types of McGregor management styles?
1- Theory X- only way man does work is through threats

2- Theory Y- man inherently enjoys work, people want to do a good job and be rewarded with praises.
Define Planning
Planning is the process of determining in advance what should be accomplished and how it should be done
What is involved in the planning process?
The mission statement
Objectives
Plans
What should be included in the mission statement?
What business are we in?
Why are we in it?
What is the reason for the existence for the organization?
What does the organization wish to achieve?
How will it achieve what it wants
What are the four organizational concepts in the management pyramid?
1- Unity of command: answer to one person
2- Span of control: the manager can only manage a limited number of people depending on complexity of task and intensity of decision making
3- Scalar principle: responsibility and authority are proportional to get job done
4- Exception principle: extraordinary decisions at the lower levels flow upward to the next level
Explain the different types of authority
1- line: decision makers, risk takers, and rewards
2- Staff: narrow range of authority, authority over what they do and very little decision making
3- Functional: can affect those that have line authority, authority is limited
What are the characteristics of objectives?
1- expressed in writing
2- measurable
3- specific as to a time frame
4- challenging but attainable
What are the types of objectives?
1- Economic: survival, profit, growth
2- Service: creation of benefit to society
3- Personal: Goals of individuals and groups
What are some common problems with objectives?
Real vs Stated objectives
Multiple Objectives
Quantitative vs Qualitiaitve
What are the characteristics of Plans
-What activities are required to accomplish the objectives
- When should the activities be carried out
- Who is responsible for what
- Where should activities be carried out
- When should the action be complete
What are standing plans and what are some common types?
Plans that remain roughly the same for long periods of time
1- Policies: decision making
2- Procedures: how to get things done
3- Rules: routine activities
4- Strategic Plan
What is a policy?
A predetermined guide established to provide direction in decision making
ex: vacation policy, dress code, medication saftey
Define Procedures:
Series of steps established for the accomplishment of some specific project or endeavor.
Define a rule:
A specific and detailed guide to action
set up to direct or restrict action in a fairly narrow manner
not up for discussion
Explain the appropriateness of policies (7)
1- Based on factual info
2- subordinate and secure
3- complementary (not contradictory)
4- coordinated
5- definite and understandable
6- flexible and stable
7- comprehensive in scope
Top 10 tips for creating a business plan.
1. clear, realistic, business projections

2. detailed mkt research

3. detailed competition research

4. mgmt

5. a killer summary

6. proof of vision

7. good formatting and clear writing

8. keep the plan short

9. design for the bottom line

10. make the plan your own
What is Gross margin?
part of sales left over to run operation and out of which comes net profit
Increased costs have lead to what?
efforts to increase containment
Essentially what is capital?
mgmt of dollars
Explain AWP-types of cost containment
avg wholesale price minus percentage
aimed at the recovery of our discounts (passing along the discounts given to us)
What is the total sales contributed by independent pharmacies?
67 billion (in annual Rx sales)...90% of their total sales...results in a shrinkage of gross margin from about 39% to about 29% and lower
What is the Role of entrepreneur? (6)
1. operations

2. sales

3. finance

4. manager

5. buyer

6. marketing and advertising
3 general aspects of a business plan?
1. an organized, logical way to look at all of the important aspects of a business

2. define and fix objectives

3. develop strategies and programs to achieve those objectives
8 major forces driving health expenses :
1. sophisticated and high priced technology

2. increased orientation toward defensive medicine

3. increased malpractice and litigation

4. aging pop.

5. increased govtal regulation

6. fee for service pricing

7. increased specialization

8. pt. insensitivity to price
4 aspects of managed care programs?
1. defined pop of enrollees

2. defined pop. of providers

3. restricted use of providers

4. prospective vs. retrospective reimbursement
9 things that Independent pharmacies have to offer?
1. individualized personalized svc...know pt.s by name...but lower vol.

2. delivery svc

3. personal charge accounts (kelly's against these, interfere with capital mgmt)

4. compounding (niche mkt)

5. nutrition (broad...TPNs, balanced nutrition, etc)

6. durable medical equipment

7. long term care

8. health screening (now MTM)

9. herbals/ homeopathics
How many independent pharmacies today?
23,500
9 aspects of entrepreneurial spirit?
1. make things happen

2. take risks

3. ambition/drive

4. self-motivation

5. vision

6. flexible/adaptable

7. creative

8. not fear change

9. make a difference/rewards
7 Trends aimed at decreasing costs
1. disease prevention

2. change the role of the pt in disease prevention and mgmt

3. emphasize total disease mgmt

4. use of physician gatekeepers

5. integrated provider networks

6. community hospital conversion

7. home healthcare
Top 7 mistakes to avoid for drafting a business plan.
. submitting a rough copy

2. outdated historical financial info on comparisons

3. unsubstantiated assumptions (ex. projections of financial performance)

4. too much blue sky - unrealistic

5. lack of understanding of financial info

6. absence of any consideration of outside influences (environment)

7. no indication that the owner has anything at stake
Indep. pharmacies dispense how many Rx's annually?
1.3 billion
Purpose of a business plan. (6)
1. define a new business

2. support a loan application

3. create regular business review and course correction (feedback)

4. evaluate a new product line or expansion

5. define agreements between partners

6. set a value on a business for sale or legal purposes
Prospective reimbursement?
insured pays certain amount regardless of how much service actually cost

-involves bundling
3 traditional HC payers
1. out of pocket/private pay

2. private indemnity insurance

3. public sector
Main pharmacy dilemma?
ethical decisions vs. economic decisions
How many Rx's per pharmacy dispensed annually?
54,427
What distinguishes pharmacy from some other businesses?
Capital intensive (employee salaries most important)

Known competition

Known customers

Dynamic, yet predictable
4 managed care models? (list from most expensive to least)
1. indemnity insurance (most)

2. IPA model HMO

3. Group Practice HMO

4. Staff model HMO (least)
Percentage of customer's completely/ very satisfied with their community pharmacy vs. chains?
85% independents
58% chains
Cost:

Price:
What the Pharmacy Pays

What the Customer Pays