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The scenario is that you have been made pharmacist-in-charge (PIC) of an independent rural pharmacy (comprising 2 other pharmacists and 5 assistants), about 3 hours north of Adelaide. There is another...

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The scenario is that you have been made pharmacist-in-charge (PIC) of an independent rural pharmacy (comprising 2 other pharmacists and 5 assistants), about 3 hours north of Adelaide. There is another pharmacy which is situated at the other end of this mid-sized town. Your pharmacy is situated at the end of town closest to Adelaide. The clientele consists of mainly farmers and families, who make up 60% of your business, plus 20% indigenous, and historically 20% tourists, both local and international, who used to visit before the pandemic. The number of local tourists is expected to increase greatly once travel restrictions within Australia are lifted, but international travel may be restricted until mid-2021.

a) Spend about XXXXXXXXXXwords on each of the following topics

i. Accounting / Finance: Discuss the importance of cash flow to the pharmacy and why major accounting reports may not provide the information you need to monitor this.

Answered Same Day May 24, 2021

Solution

Charanjeet answered on May 25 2021
143 Votes
Cash flow is very important for all type of businesses and industries. The main purpose of pharmacy or other type of business is to increase their cash inflows and decrease cash outflows so that both operational efficiency and profitability of their business can be increased. But there is difference between the time period of purchase of medicines and sales of same in case of pharmacy business. During that time period the medicine stock lays on the shelves and it represents cash use. This difference in purchase time and sale time of medicines during which cash remain used in the form of stock is known as cash conversion cycle. The cash flow analysis is important to know the time period of this cycle and cash position of the business will depend on period of this cycle (Herist et al, 2011). More time period of this conversion shows the inefficiency of the business. When medicines are purchased by pharmacy then it creates an obligation to pay and this stock remained in the pharmacy until these are prescribed to patients. When these medicines are prescribed either they are paid in cash or on account receivables. If there is much difference in receipts on account of these account receivables and payment...
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