Flora-Stats Annual Report 1998
1998 Wholesaler’s Profitability Report (1997 Data)
Executive Summary
Financial performance varied widely within WF&FSA in 1997. As can be seen in the exhibit on the facing page, the typical firm had sales of $3,638, 101 and a pre-tax profit of 2.0 percent. In contrast, the high-profit firm had sales of $3,875,758, and profit of 5.6 percent. Of greatest consequence, the typical firm had a pre-tax return on assets (profit before taxes expressed as a percentage of total assets) of 7.6 percent. For the high profit firm return on assets was 24.0 percent.
A number of factors led to the differences in results. In most instances these differences can best be illustrated by what are commonly called the critical profit variables (CPVs). The following exhibit compares the typical and the high profit firm on the critical profit variables.
The Critical Profit Variables
| Typical WF&FSA Dist. | High Profit WF&FSA | |
| Gross Margin Reflects the ability to buy and sell optimally |
32.2% | 33.8% |
| Operating Expense Focuses on expense control |
30.8% | 28.1% |
| Inventory Turnover Reflects how well inventory is managed |
11.1 Times | 13.4 Times |
| Average Collection Period Reflects acconts receivable collection practices |
47.5 Days | 39.5 Days |
The high profit firm seldom performs better on all of the critical profit variables. Instead, it is the sum-total of their performance on the CPVs which produces higher overall results. The nature of the differences between the typical and the high profit firm and the underlying reasons for those differences need to be understood by everyone.
The typical and the high profit firms have different sales volumes. They also differ on the critical profit variables identified above. The result is dramatically improved operating performance. The following exhibit indicates the results the typical firm achieved and the results the high profit company earned.
An Overview of Financial Results
| Typical WF&FSA Dist. | High Profit WF&FSA | |
| Net Sales | $3,638,101 | $3,875,758 |
| Cost of Goods Sold | 2,467,360 | $2,565,752 |
| Gross Margin | 1,170,741 | 1,310,006 |
| Operating Expenses | 1,119,807 | 1,090,638 |
| Operating Profit | 50,933 | 219,368 |
| Other Income/Expense | 23,284 | -1,550 |
| Profit Before Taxes | $74,217 | $217,818 |
| Total Assets | $980,620 | $905,551 |
| Return on Assets | 7.6% | 24.0% |
