Editorial Type:
Veterinary Economics

Factors associated with financial performance of independently owned companion and mixed animal veterinary practices

Lynn E. Dodge 1Pilgrim's Pride Corp, 1770 Promontory Cir, Greeley, CO 80634.

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 MS
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Stephen R. Koontz 2Department of Agricultural and Resource Economics, Colorado State University, Fort Collins, CO 80523.

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Joleen C. Hadrich 3Department of Applied Economics, University of Minnesota, Saint Paul MN 55108.

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DOI:
https://doi.org/10.2460/javma.255.7.805
Volume/Issue:
Volume 255: Issue 7
Online Publication Date:
01 Oct 2019
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Abstract

OBJECTIVE

To identify factors associated with financial performance of independently owned companion and mixed animal veterinary practices.

SAMPLE

Financial statements (ie, annual balance sheets and income statements for 3 consecutive years) were obtained from 45 practices.

PROCEDURES

Ratio analysis of financial statements was performed with the DuPont Model, and practices were grouped into 4 financial performance groups on the basis of return on equity. Liquidity and solvency ratios and debt management and asset investment practices were then compared among financial performance groups

RESULTS

Financial liquidity was low across all financial performance groups, but most practices were solvent, with assets exceeding liabilities. Debt management was found to be a limiting factor for financial success, with lower-performing practices using credit cards and lines of credit to purchase capital assets. Practices that were not solvent owed debts on the purchase of intangible assets and had higher owner withdrawals, compared with other practices. Practices that built productive capacity by borrowing and investing in productive assets had higher long-term returns.

CONCLUSIONS AND CLINICAL RELEVANCE

Results suggested that proper debt management coupled with prudent asset investment was associated with higher financial performance for independently owned companion and mixed animal veterinary practices.

Abstract

OBJECTIVE

To identify factors associated with financial performance of independently owned companion and mixed animal veterinary practices.

SAMPLE

Financial statements (ie, annual balance sheets and income statements for 3 consecutive years) were obtained from 45 practices.

PROCEDURES

Ratio analysis of financial statements was performed with the DuPont Model, and practices were grouped into 4 financial performance groups on the basis of return on equity. Liquidity and solvency ratios and debt management and asset investment practices were then compared among financial performance groups

RESULTS

Financial liquidity was low across all financial performance groups, but most practices were solvent, with assets exceeding liabilities. Debt management was found to be a limiting factor for financial success, with lower-performing practices using credit cards and lines of credit to purchase capital assets. Practices that were not solvent owed debts on the purchase of intangible assets and had higher owner withdrawals, compared with other practices. Practices that built productive capacity by borrowing and investing in productive assets had higher long-term returns.

CONCLUSIONS AND CLINICAL RELEVANCE

Results suggested that proper debt management coupled with prudent asset investment was associated with higher financial performance for independently owned companion and mixed animal veterinary practices.

Contributor Notes

Address correspondence to Dr. Hadrich (jhadrich@umn.edu).
Cover Journal of the American Veterinary Medical Association
Journal of the American Veterinary Medical Association
Publication Date:
01 Oct 2019

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