what calculations were used for Using the historical data from Table 1 as a guide, we can
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what calculations were used for Using the historical data from Table 1 as a guide, we can adjust the costs and revenues for inflation to forecast the profit and loss statement for an average day in 2018:
Table 4: Pro Forma Profit and Loss Statement for 2018 (assuming constant volume)
Average Daily Amount (2018$) | |
---|---|
Net Revenue | $1,682.62* |
Salaries and Wages | $564** |
Physician Fees | $720** |
Malpractice Insurance | $130** |
Travel and Education | $35** |
General Insurance | $45** |
Utilities | $6** |
Equipment Leases | $536** |
Building Lease | $385** |
Other Operating Expenses | $360** |
Total Operating Expenses | $2,781** |
Net Profit (Loss) | ($1,098.38)** |
Net Revenue is adjusted by 2% inflation per year, $1,682.62 = $1,524(1.02)^5
**All costs are adjusted by 2% inflation per year.
As you can see, even assuming the clinic is able to inflate its way to profitability by increasing its revenue through inflation, the clinic would still not be projected to make a profit in 2018 with constant volume.
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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