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Pharmaceutical industry competition
Business aspects of the pharmaceutical industry
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Summary Cardinal Health Inc. (NYSE:CAH) ranks amongst the industry leaders in the medical supply market. However, recent financial performance suggests challenges for Cardinal Health. In addition to the recently passed Patient Care and Affordability Act, Cardinal Heath underwent significant changes in fiscal 2010. An analysis of several key financial ratios offers mixed results. Highlighting these changes was the divesture of Care Fusion, Inc. and the acquisition of pharmaceutical companies bolstering Cardinal's portfolio. During difficult economic times, Cardinal Health was able to grow revenues 3%, increase inventory turns, and maintain an industry leading cash conversion cycle. However, profit margins continue to decline amid declining earnings. Efficiency ratios indicate how well a company is using its assets. This efficient use of inventory leads to resourceful cash conversion especially significant in a low margin industry. The favorable use of inventory benefits Cardinal Health as they face certain pricing pressure in 2011. Cardinal Health continues to rank among the industry leaders of the medical supply industry with an inventory turn ratio of 14.0 up from 13.5 in fiscal year 2009 (financial.morningstar.com). In comparison, competitors McKesson Corporation's 2009 inventory turns were 11.5, while AmerisourceBergen inventory turns were 14.8. An inventory to sales ratio of 6.5 and an asset turnover ratio of 4.4 further supports the effective use of inventory and assets as compared to major competitors (advfn.com). Adding to the efficiency of cash use, Cardinal Health maintains a receivable turnover rate of 18.2 in fiscal year 2010 down only slightly from 18.7 in 2009 (advfn.com). Compared with their closest competito... ... middle of paper ... ...emographics, and additional insured people bode well for the future of Cardinal Health. Controlling costs and bolstering sales of high margin product will allow Cardinal Health to increase profits and grow shareholder return. Works Cited Advfn.com. Retrieved December 1, 2010 from http://www.advfn.com/p.php?pid=financials&btn=s_ok&mode=company_data&symbol=NYSE%3Aomi Financials.Morningstar.com. Retrieved December 2, 210 from http://financials.morningstar.com/ratios/r.html?t=MCK Mueller, J. (2010). How Well Do You Use Cash Cardinal Health? Retrieved December 1, 2010 from http://www.fool.com/investing/general/2010/08/23/how-well-do-you-use-cash-cardinal-health.aspx Ross, S., Westerfield, R., & Jordan, B. (2010). Fundamentals of Corporate Finance. New York: McGraw Hill. Yahoo.com. Retrieved December 3, 2010 from http://finance.yahoo.com/q/ks?s=CAH+Key+Statistics
Flinker S., Ward D., Calabrese T., (2013). Accounting Fundamentals for Health Care Management, 2nd edition.
Emanuel Medical Center (EMC) is having an enormous amount of issues, financially. Even the CEO, Robert Moen, knows they are experiencing a number of challenges and it cannot be fixed overnight. One of the main challenges EMC are facing is the federal regulation change(s). They are playing a big role in the financial struggle with lower reimbursement rates for federal insurance programs, implementation of EMTALA laws, development of services offered by other local competing hospitals, changes in service area demographics, which have all contributed to five sequential negative operating margins for EMC.
...and his vision in successfully transforming the medical center to a tertiary care facility. However, in 2008 under Ron Henderson, the medical center expenses began to skyrocket and revenues failed to keep up. Also, a hospital census indicated that, on average, Medicare patients consisted of 58% and Medicaid patients consisted of 18% which caused the medical center to suffer from reductions in reimbursements. Although noted by solid evidence that utilization was experiencing a steep decline, Mr. Henderson added 127 new positions to the medical center. In 2009, Mr. Henderson was fired after the board of trustees realized that this financial bind of an $8.6 million deficit was caused by Mr. Henderson. In order for the new CEO, Richard Reynolds, to succeed at his new job title, he must create a benchmarking process adopting certain goals to remain a worthy competitor.
The purpose of financial measurement in healthcare is to provide the community with the services it needs, at a clinically acceptable level of quality, at a publicly responsive level of amenity, at the least possible cost. This is done by providing healthcare finance managers with accounting and finance information to help accomplish the purpose of the organization (Nowicki, 2015). When making accounting decisions about budgeting and inventory control, an understanding of economics, statistics, and operations research is needed. Major Financial Measures
In addition to this business plan, we must also address the financial issues plaguing this organization. To illustrate some of these issues lets look at some of the trends here at OCB and within our Industry: For example, OCB’s clinic operations profitability in 1990 was 60%, and now in 1996 our profitability is only 37%, which is down 23 percentage points! We can blame some of this on rising costs of overhead, consumables, etc, however this is happening as the industry as a whole is growing 5% annually, and as our customer base, largely senior citizens, population is growing at almost 1% as year. We should be capitalizing on these industry trends, however, as you all know, not all the trends work in our favor. For example, our lifeblood, the Insurance company’s managed care organizations, and government healthcare reimbursement programs shows a downward trend of allowable payments for our services (DRGs) For example in 1995 the DRG price of ...
First, let us analyze General Practice Affiliates’ current financial position. The income and expenses report shows a net revenue of $230,250. The net revenue is obtained after expenses, including taxes, of the company have been subtracted from revenue (Paterson, 2014, p. 124). The balance sheet shows a $306,180 in retained earnings. Retained earnings represent stakeholders’ equity (Paterson, 2014, p. 128). Retained earnings are usually invested back in the form of inventory or debt payments (Albrecht, Stice, Stice , & Swain, 2008). General Practice Affiliates’ cash flow analysis shows that the practice invests in new equipment. However, General Practice Affiliates mainly used cash during 2012. The main source of cash from operations came from depreciation expense, which is not a reliable source of funding (Paterson, 2014, p. 130). Accounts receivable increased by $50,000, while accounts payable only increased by $10,000. In addition, cash flow analysis shows a balance sheet data that is affected by future transactions (Paterson, 2014, p. 128). General Practice Affiliates choose to stretch the time to pay suppliers instead of paying its bills. ...
Analyzing Wal-Mart's annual report provides a positive outlook on Wal-Mart's financial health. Given the specific ratios and its comparison to other companies in the same industry, Wal-Mart is leading and more than likely continue its dominance. Though Wal-Mart did not lead in all numbers, its leadership and strong presence of the market cements the ongoing success. The review of the current ratio, quick ratio, inventory turnover ratio, debt ratio, net profit margin ratio, ROI, ROE, and P/E ratio all indicate an upbeat future for the company. The current ratio, which is defined as current assets divided by current liabilities, is a measure of how much liabilities a company has compared to its assets. Wal-Mart in the year of 2007 had a current ratio of .90, and as of January 2008 it had a current ratio of .81. The quick ratio, which is defined as current assets minus inventory divided by current liabilities, is a measure of a company's ability pay short term obligations. Wal-Mart in the year of 2007 had a quick ratio of .25, and as of January 2008 it had a ratio of .21. Both the current ratio and quick ratio are a measure of liquidity. Wal-Mart is not as liquid as its competitors such as Costco or Family Dollar Stores Inc. I believe the reason why Wal-Mart is not too liquid is because they are heavily investing their profits for expansion and growth. Management claims in their financial report that holding their liquid reserves in other currencies have helped Wal-Mart hedge against inflationary pressures of the US dollar. The next ratio to look at is the inventory ratio which is defined as the cost of sales divided by average inventory. In the year of 2007, Wal-Mart’s inventory ratio was 7.68, and as of January 2008 it was 7.96. Wal-Mart has a lot of sales therefore it doesn’t have too much a problem of holding too much inventory. Its competitors have similar ratios though they don’t have as much sales as Wal-Mart. Wal-Mart’s ability to sell at lower prices for same quality, gives them the edge against its competition. As of the year 2007, Wal-Mart had a debt ratio of .58, and as of January 2008, it had a debt ratio of .59. The debt ratio is calculated by dividing the total debt by its total assets. Wal-Mart has a lot more assets than it does debt so Wal-Mart is not overleveraged.
... Capital, Corporation Finance and the Theory of Investment", The American Economic Review, vol. 48, no. 3, pp. 261-297.
Hospital Corporation of America (HCA). Staff Analysis Statement of Problem HCA, after following a conservative financial policy since its establishment, has entered the new decade preparing to make some changes in order to realign their financial strategy and capital structure. Since its establishment, HCA has often been used as a measure for the entire proprietary hospital industry. Is it now time for the market to realign their expectations for the industry as a whole? HCA has target goals that need to be met in order to accomplish milestones in the future.
Competitive advantage matters greatly to those responsible for the management of healthcare institutions. Together with rapidly escalating healthcare costs, increasingly complex medical technologies, and growing regulatory and legal pressures, healthcare organizations face a critical need to improve the quality of care at reduced costs (Cu...
The first business principle that is associated with patient and system cost is manage cash flow very closely (Fisher,
William Sharpe, Gordon J. Alexander, Jeffrey W Bailey. Investments. Prentice Hall; 6 edition, October 20, 1998
Berk, J., & DeMarzo, P. (2011). Corporate finance: The core, second edition. (2nd ed.). Boston, MA: Prentice Hall.
Brealey, Richard A., Marcus, Alan J., Myers, Stewart C. 1999, Fundamentals of Corporate Finance, 2nd edn, Craig S. Beytien, USA.
Block, S. B., & Hirt, G. A. (2005). Foundations of financial management. (11th ed.). New York: McGraw-Hill.