Vet Economics Midterm

For taxes what kind of accounting do we use?

CASH accounting

What are the two types of leases?

Capital lease and operational lease

Who governs control substances?

DEA

Who licenses new prescriptions to be used in animals?

FDA

What is the difference between GAAP and Cash?

GAAP is accrual and Cash is taxes

What is GAAP?

Generally accepted accounting procedures; usually for corporations

What is client utility?

How satisfied the clients are and how much value they are getting out of their money

Explain good will in terms of money:

If a practice is being sold for more than what the owner bought it for, that extra money that the owner is getting is the "good will"

What kind of business can a veterinary practice run and why?

S corporation; tax advantage

What are the three forms of businesses that vets do?

S corps, general & sole proprietorship

What are profit centers? Give examples.

different parts of the hospital that generate income: - office visits - x-ray - pharmacy - boarding - grooming

What are six factors affecting the veterinary market?

discretionary income cost of technology cost of skilled employees overcapacity slow-increasing pet population the internet

What brings in the most revenue?

exams and pharmacy

What is the theory of the firm?

firms exist and make decisions in order to maximize profits

Define the two types of financial statements

fixed (overhead) -> grant, salary, insurance variable -> things related to the number of clients and patients coming in

What does a graph of fixed costs look like?

fixed costs = straight horizontal line variable costs = straight line going up total cost = straight line going even more up

What is the overhead

fixed expenses - expenses that don't ever change like rent, utilities, etc.

What does it take to be a veterinarian?

graduate from AVMA school national exam state exam state fees live scan

What does it take to be a veterinary technician?

graduate from AVMA school national exam state exam state fees live scan

You would need a USDA certification to do what?

health certificates

What does the term liquidity mean?

how much cash you can raise in a year

Define net income

income after all the expenses have been met

What does the demand supply curve show?

it shows equilibrium is at the point where supply and demand meet

What is discretionary income?

leftover money

What percentage of net profit are most veterinary practices at?

less than five percent

Define current liabilities

liabilities that will be settled within one year or the operating cycle whichever is longer

What do we call it when we break down a loan overtime?

loan amortization

How do clients choose their veterinarians?

locations

Define capital

long term (building, car, ultrasound machine)

What is an example of a long-term debt?

long-term liability

Define depreciation

loss in value of equipment per year

What is a disadvantage of writing off the entire incentive in one year?

may have more taxes to pay next year

What is P/E?

measure of volatility; higher the P/E, the more speculative the stock gets

What are some barriers to entry and why do they help veterinary professionals and their clients?

money and equipment; keeps prices high, keeps clients because they're getting treated by qualified professionals

What is the formula to find your profit margin percentage?

net income/gross income

What are disadvantages of sole proprietorship?

no liability; you can't shield any income from taxes

What is an example of low client utility?

office visits

What profit center in the hospital is most profitable?

office visits and exams

How are prices determined? (formula)

overhead + labor + variable-cost supplies + 0.15P overhead = % of income variable cost = COGS x 0.4 profit margins = 15% x P

Define principal

paying back on the equipment

Describe the two kinds of software

practice management - takes account into the income you get from practice that day financial - takes account of expenses

How do you find your net profit?

profit divided by gross income after everybody and bills are paid

What is current ratio and what is it also for?

quick ratio; a way to see how companies are doing economically

What is an operating lease?

rental agreement; no transfer of ownership

What is book value?

shareholders equity

What is cash flow?

shows where the money is flowing

Why do we want to employ veterinary technicians?

so that veterinarians can do "vet" stuff and be more profitable

Which form of doing business is the easiest?

sole proprietorship

Name four methods of doing business and explain each:

sole proprietorship - one person practice general partnership - multiple vets, unlimited liability S corps - doctors, dentists, etc. C Corps - most businesses like apple

What is depreciation?

something that loses value over time such as a long term asset

What is a long term asset?

something you use for an extended period of time

What are the downsides of S corporations?

state fee and annual examinations

Define current assets

stuff that can be converted to cash within a year

Define earnings per share (EPS)

take the earnings of a company and divide by the amount of shares

Define amortization

the amount of taxes we write off

Who board certifies veterinarians?

the college specialty that they go to

What are indirect costs?

the monetary value that is charged beyond the cost of good for the purpose of earning profit

What is good will in a practice?

the value of the business (value of the clients)

Define salvage value

the value the equipment or item has after the end of the lease

Who issues the veterinary technician license?

the veterinary medical board (subdivision of state department of consumer affairs)

How do veterinarians base prices?

they base them off their perception of costs and difficulty without an economic basis

How are veterinarians paid?

through salary and 20-25% commission

What is the purpose of theory of the firm?

to maximize shareholder equity

Why does a veterinary hospital need to employ a veterinary technician?

to monitor anesthesia

What is the purpose of the graph of fixed costs?

to show the most optimal level of clients and how many you are gaining or losing to determine prices

What are items that are highly elastic (most asked about)?

vaccines spays office visit prices microchips flea products

What are variable expenses?

vaccines, medicines, supplies, labs, overtime

Define assets

what they have

What is overcapacity?

when there are too many employees and machines aren't being used enough

What is reciprocity?

when you pass both exams and are able to practice your vet tech license in almost all states

How do you calculate an average transaction fee?

you divide the income from the previous year by the total number of transactions

What is the break even quantity formula?

BEQ=FC/P-VC (FC - fixed costs) (P - price charged per unit) (VC - variable costs)

What percentage of the income should your practice use for advertising?

3-5%

What are the percent profit margins for good and bad?

3-5% not good 5-10% good 10-15% great 20% terrific

What indirect cost factor are we using in this class?

40% so indirect costs (VC) = COGS x 0.4

How much time do vet and vet techs spend making income activity expense?

50%

How many licenses should you have to open a practice?

6 - business, X-ray, DEA, DVM, RVT, Premise zoned and USDA (not completely required)

What is the production possibility frontier?

A curve that depicts the various combinations of two procedures that can be produced when all the available resources are fully and efficiently employed.

Who accredits veterinary school?

AVMA

What is a capital lease?

a purchased asset for accounting purposes

Define liabilities

amounts owed

If you are in charge of marketing, how much should you spend on your marketing practice?

between 3-5%

How does society allocated scarce resources?

charge more

What is a veterinary practice's target market?

clients

What is the purpose of the economic pricing model?

comparing your prices to competing prices and making sure you're above the 5%

What is an example of a good operating lease?

computer

What is COGS?

cost of goods sold

What is the formula to find the current ratio?

current assets divided by current liability

What is one example of a short-term debt?

current liability