Eyedropper Clinic

Exercise

Diseñada y elaborada por:

Designed and produced by:
Francisco José, Hernández
Jordi Carenys Martínez, profesor de EADA.
EADA lecturer.

This exercise has been prepared for didactic purposes and as a basis for discussion. It should not be
considered valid as an example (acceptable or not) of management..

Reproduction prohibited.
Escuela de Alta Dirección y Administración Eyedropper Clinic

EYEDROPPER CLINIC

Doctor Barraqueta is an ophthalmologist who has just set up his own clinic devoted to state of
the art eye surgery. In recent years, doctor Barraqueta has earned a prestigious reputation as
a surgeon and consequently the new company’s prospects for future development are very
favourable. During its first month in business he carried out the following operations:
1. In order to get the business rolling, doctor Barraqueta deposited 18,000 € in a current
account under the company name.
2. He took out a mortgage loan with the same bank and bought ground floor premises for
96,000 €, where he intends to set up his private surgery. The loan amount is 90,000 €
and he must pay it back over the next 15 years, though he has negotiated a one year
exemption period.
3. He also bought medical equipment and machinery at a cost of 35,000 €, of which he paid
20% in cash whilst negotiating with his suppliers to pay the rest off over the next 6
months.
4. During the first month the services he sold to private clients and clients from private
health insurance companies amounted to 22,000 € and 30,000 € respectively. The health
insurance companies pay their invoices within 60 days whereas private clients pay cash
(half in cash and the rest by credit card, for which the bank charges a 1% commission.)
5. In order to offer these services doctor Barraqueta hired two ophthalmologist whose pay
amounted to 10,000 €. Doctor Barraqueta has managed to get them to consent to being
paid within 60 days.
6. He ordered publicity brochures from a local printer’s which were then distributed by mail.
Printing and mailing costs amounted to 1,000 € which was paid in cash.
7. Consumables were purchased throughout the month (gauze, cotton, anaesthetics,
disinfectants...) for the amount of 15,000 €. They were paid by various bank cheques.
8. Doctor Barraqueta hired a student in training as an assistant. The assistant’s salary is
800 € a month. However, she will not begin to get paid until the end of next month. He
also hired a nurse who earns 1,200 € a month which she has already received.
9. Throughout the month bills came in for various services (electricity, water,
insurance, telephone...) which amounted to 6,500 €. These were all paid by cheque.
10. Looking at the state of the cash & banks account, Dr. Barraqueta is considering the
possibility of putting forward the payment of an invoice from one of the health insurance
companies, which owes him 6,000 €. After getting in touch with them, the health
insurance provider agreed to pay the debt amount immediately but asked for a 5%
discount.
11. Dr. Barraqueta has assigned himself a monthly salary of 7,500 € which he has already
been paid.
12. The company’s social security payments amount to 30% for all the salaries, and will be
paid out next month.

Copyright © 2004 EADA - International Management Development Centre, Barcelona.

This exercise was prepared by professor Jordi Carenys of EADA.
Reproduction prohibited without written permision from EADA.

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Eyedropper Clinic Escuela de Alta Dirección y Administración

Notes:
1. The loan accrues 6% yearly interest.
2. The depreciation period for the premises is 40 years and for the equipment and
machinery, 10 years.
3. At the end of the month the consumables that were left over in the pharmacy of the clinic
amounted to 1,500 €.
a) What state are the clinic’s assets and liabilities in?

b) What were the results of the Eyedropper Clinic during its first month of operations?
c) What state is the cash & banks account in?

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