Essay Example on Clinic's Total Profit Margin & Net Income: $1.5M

Introduction

Depreciation expenses $1,000,000 Net income Total revenue- total expenses $5000000-$4,500,000 Net income=$1,500,000

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Total Profit Margin and Net Income for the Clinic

Total profit margin = Net Incometotal revenue× 100

=$1500000$5000000× 100 = 30%

Net income = total revenue –total expenses

= $5000000-$4500000 = $1500000

The Difference between Gross Income and Net Income

Gross income refers to the total amount of income that a business earns over a given period of time, especially fiscal year or quarter (May, 2016). It is mainly the amount of revenue that a business earns from the sales of services or goods, especially before the administrative, selling, tax, as well as other expenses have been deducted (Sessoms, 2020). On the other hand, net income comprises the amount of revenue that a business gets after all expenses have been subtracted from sales (Nishikawa, 2016); it is the final amount of loss or profit that a business remains with after all expenses have been excluded.

Whether the Clinic can afford to Purchase and Renovate the new Facility

The clinic will be capable of buying and renovating the new facility.

Information for Making the Decision

The clinic will be capable of buying and renovating the new facility; this decision is arrived at since after undertaking computations, it clearly emerges that the net income of the clinic is much higher than the amount that has been apportioned for the new facility; this will make it possible for the clinic to cater for the needed expenses including the expenses for the unforeseen circumstances. It, therefore, means that the clinic will be capable of buying and renovating the new facility as long as the adequacy of finance is concerned.

Recommendation for Handling the Financing for Purchasing and Renovating the Facility

For effective financing for purchasing and renovation of the facility, I would recommend that the clinic identify suppliers in various categories on the basis of criteria such as price, quality, as well as delivery history; this way, the clinic will be presented with numerous options and, therefore, make informed purchase decisions (Khan et al., 2020). Identification of suppliers in various categories is significant in scenarios where the main suppliers increase their prices or stop selling the material; the clinic can go for alternative suppliers.

Conclusion

Moreover, I would recommend that the clinic develop strategies that can make it easier for them to track the way the finance is used for every step of the work (Khan et al., 2020). By so doing, the finance may not be misused on other things that they are not intended but rather spent only on meaningful things.

Further, if all can be done without interfering with the quality and price competitiveness, I would recommend the clinic purchase material locally as this will help the clinic in cutting costs associated with the shipping of the materials (Khan et al., 2020).

References

Khan, J., Hassan, Z., & Tajik, M. (2020). Antibiotic Resistance: Recommendations for procurement agencies of public sector hospitals. Journal Of The College of Physicians And Surgeons Pakistan, 30(03), 340-341. https://doi.org/10.29271/jcpsp.2020.03.340

May, G. (2016). Gross Income. The Quarterly Journal of Economics, 55(3), 521. https://doi.org/10.2307/1885644

Nishikawa, I., Kamiya, T., & Kawanishi, Y. (2016). The definitions of net income and comprehensive income and their implications for measurement. Accounting Horizons, 30(4), 511-516. https://doi.org/10.2308/acch-51544

Sessoms, G. (2020). The Difference Between Gross & Net in Accounting. Small Business - Chron.com. Retrieved 12 June 2020, from https://smallbusiness.chron.com/difference-between-gross-net-accounting-56691.html