Appraising the financial performance of East Cantonments Pharmacy Limited

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Over the years some pharmaceutical companies in Ghana have experienced financial crises, weak internal control systems and total collapse among other financial problems. But for East Cantonments Pharmacy (ECP) there seems to be a steady growth and to ascertain this financial reliability, the study evaluated the financial performance of ECP over the six years of its operating existence as Limited Liability Company from 2002 to 2007. The study took into account the application of financial ratios such as profitability, liquidity, leverage, quick ratio and trend analysis to establish its financial performance, identified weaknesses and made recommendations to address them. The existing literature on financial performance and financial ratios served as useful sources to the study. The scope of study was limited to ECP branch and headquarters. Based on the available data the result indicated that the company was not highly liquid and does not indicate danger of making losses. The stockpile of ECP was found to be high, general expenses of the company were also high with fixed asset turnover being low. The high investment in stock affected ECP’s profitability. It was concluded that the major problem affecting the company’s financial development was its comparatively low level of capital which compelled the company to resort to debt finance in order to support its funds with attendant cost. Recommendations to improve upon the company’s financial performance included making an offer to be listed on the stock exchange to raise capital and also provide an avenue for prospective investors. The study also recommended that Management must address the issue of high expenditure by doing comparative cost analysis internally and externally with the focus on reducing operating expenses. ECP’s stockpile need to be turned over quickly and ploughing back the profit will increase the operating capital and returns of the company. Further investment in the field of information technology will improve the company’s operations as well as enhance easier access to information.
A thesisi submitted to the School of Business, kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the degree of Master of Business Administration, 2008