In essence, it is important to accept the proposal of adding a retail pharmacy to a hospital since the 3 year profitability of the Retail Pharmacy shows that it is currently more efficient in generating profits from the assets employed in the business. The efficiency could be attributed to the dynamic structural demands of the healthcare service market and how Sample GeneralHospital has mastered the art of servicing its clients using the appropriate and relevant medical approaches. Moreover, the good financial performance of the business could be attributed to the improved ratings by fortune 500 evaluators that have boosted its operations and visibility. It is also evidenced from the detailed examination of the monthly income statement of the business that it has sufficient cash to finance its daily business activities, without necessarily borrowing from creditors to finance its operations. This enables the business to cut down on its operating expenses, such as interest expenses, which are to be paid to the creditors as a fee on the borrowed capital.
Moreover, a positive working capital figure of the business clearly indicates the sufficiency in terms of its liquidity. This is because current ratio implies that the business operates over a higher margin of safety as it is the conventional expectation. It is important to note that a higher working indicates the sufficiency of the enterprise’s ability to meet its current obligations. Therefore, this means that the current assets of the company are more than its current liabilities. This shows that there is no likelihood of liquidity problem in the venture if it maintains a rising positive trend. Such a stable ventures can be advised to expand by adding a retail pharmacy to its hospital business.
Summing up, this financial assessment supports the establishment of a retail pharmacy alongside the hospital business. Moreover, it is important to improve on the financial reporting by following proper accounting guidelines when recording business transactions. For example, capital expenditures such as equipment purchases and building renovations are not meant to be expensed directly in the income statements of the business, but they should be depreciated and the depreciation amounts charged accordingly. Finally, the CFO of this business should improve on his/her accounting reconciliations.