©BRAINBARTER EXAM SOLUTIONS 2024/2025
ALL RIGHTS RESERVED.
Financial Analysis Exam Study Guide.
Define financial analysis - answer✔A systematic means of determining how well the assets of a
business are being managed and controlled.
Financial analysis is based on information found in financial statements.*The three most
commonly used financial statements are:* - answer✔*•Income Statement* (Statement of
Profit and Loss; P and L).
*•Balance Sheet* (Statement of Financial Condition).
*•Statement of Cash Flows* (How much cash you bring in and how much cash you move out).
*1.)* What does the income statement do?
*2.)* Basically, it's...
*3.)* The result is a... - answer✔*1.)* Matches the amounts received from selling goods and
services against all the costs and outlays incurred in order to operate the pharmacy.
*2.)* revenue vs. expenses
*3.)* net profit or loss for the year.
*T or F:*
•The income statement shows you how your business is doing at a specific point of time. -
answer✔False, the income statement is a time-dynamic document prepared for a period of
time, not a specific point in time (Typically over a one year period).
*NOTE: Sales (Revenue)*
•Sales can be categorized by type (Rx vs. OTC) or payment method (Cash vs. Third Party), etc. -
answer✔*NOTE: Sales (Revenue)*
•Sales can be categorized by type (Rx vs. OTC) or payment method (Cash vs. Third Party), etc.
*Components*
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, ©BRAINBARTER EXAM SOLUTIONS 2024/2025
ALL RIGHTS RESERVED.
•What is the equation for cost of Goods Sold (COGS). - answer✔COGS = Beginning inventory +
Purchases - Ending inventory
This value determines whether we're managing our inventory properly. When we compare this
to sales, the higher the ratio (COGS : Sales) the worse off we're doing in terms of managing our
inventory.
*NOTE:*
•Paying attention to COGS can help a manager determine whether they are managing
inventory properly. - answer✔*NOTE:*
•Paying attention to COGS can help a manager determine whether they are managing
inventory properly.
COGS compared to Net Sales. - answer✔As COGS increases, Gross Profit Margin decreases.
A high COGS% may indicate what 5 things? - answer✔•A need to update inventory.
•A high percentage of 3rd party scripts.
•Pilferage
•Inappropriate pricing
•Not taking advantage of cash discounts
Gross Margin (GM) is another component of the income statement. *What are two equations
associated with GM?* - answer✔•GM = Sales - COGS
•GM - Expenses = Net Profit
The amount where you take the rest of the expenses from. The higher the growth margin, the
higher the profitability.
*NOTE: Components of the Income Statement (Expenses).*
•Paying close attention to expense categories is important in financial analysis.
•Many items listed as expenses have a relationship to items listed on the balance sheet, and
therefore, help to tell a story. - answer✔*NOTE: Components of the Income Statement
(Expenses).*
2|Page
ALL RIGHTS RESERVED.
Financial Analysis Exam Study Guide.
Define financial analysis - answer✔A systematic means of determining how well the assets of a
business are being managed and controlled.
Financial analysis is based on information found in financial statements.*The three most
commonly used financial statements are:* - answer✔*•Income Statement* (Statement of
Profit and Loss; P and L).
*•Balance Sheet* (Statement of Financial Condition).
*•Statement of Cash Flows* (How much cash you bring in and how much cash you move out).
*1.)* What does the income statement do?
*2.)* Basically, it's...
*3.)* The result is a... - answer✔*1.)* Matches the amounts received from selling goods and
services against all the costs and outlays incurred in order to operate the pharmacy.
*2.)* revenue vs. expenses
*3.)* net profit or loss for the year.
*T or F:*
•The income statement shows you how your business is doing at a specific point of time. -
answer✔False, the income statement is a time-dynamic document prepared for a period of
time, not a specific point in time (Typically over a one year period).
*NOTE: Sales (Revenue)*
•Sales can be categorized by type (Rx vs. OTC) or payment method (Cash vs. Third Party), etc. -
answer✔*NOTE: Sales (Revenue)*
•Sales can be categorized by type (Rx vs. OTC) or payment method (Cash vs. Third Party), etc.
*Components*
1|Page
, ©BRAINBARTER EXAM SOLUTIONS 2024/2025
ALL RIGHTS RESERVED.
•What is the equation for cost of Goods Sold (COGS). - answer✔COGS = Beginning inventory +
Purchases - Ending inventory
This value determines whether we're managing our inventory properly. When we compare this
to sales, the higher the ratio (COGS : Sales) the worse off we're doing in terms of managing our
inventory.
*NOTE:*
•Paying attention to COGS can help a manager determine whether they are managing
inventory properly. - answer✔*NOTE:*
•Paying attention to COGS can help a manager determine whether they are managing
inventory properly.
COGS compared to Net Sales. - answer✔As COGS increases, Gross Profit Margin decreases.
A high COGS% may indicate what 5 things? - answer✔•A need to update inventory.
•A high percentage of 3rd party scripts.
•Pilferage
•Inappropriate pricing
•Not taking advantage of cash discounts
Gross Margin (GM) is another component of the income statement. *What are two equations
associated with GM?* - answer✔•GM = Sales - COGS
•GM - Expenses = Net Profit
The amount where you take the rest of the expenses from. The higher the growth margin, the
higher the profitability.
*NOTE: Components of the Income Statement (Expenses).*
•Paying close attention to expense categories is important in financial analysis.
•Many items listed as expenses have a relationship to items listed on the balance sheet, and
therefore, help to tell a story. - answer✔*NOTE: Components of the Income Statement
(Expenses).*
2|Page
