Determining Financial Viability

699 Words Dec 15th, 2012 3 Pages
Determining Financial Viability
Accounting and finance are closely related to a certain extent in which both deal with the financial aspects of a company. Accounting and finance work together in creating “a company’s budget or working capital analysis” (Wise-Geek, 2012, p. 1). Accounting involves recording of an organizations operations of a business as well as showing the information in the outline profit and loss accounts, which demonstrates the gain or loss of the organizations throughout the year. In addition, accounting includes provisions of a balance sheet replicating the monetary positions of a business at a specific time period. It should provide clear and precise figures about the proprietary and financial condition in a
…show more content…
The generation of capital will assist a facility with operating successfully, and “most financial analysts would expect an institution's revenues to exceed expenses, so as to finance increases in working capital and build funds as a cushion for a financial downturn and for renewal or expansion” (Needleman, 2003, p. 1).
In addition, the viability within a health care organization hinges on the present balance sheets and cash flow. It is important for institutions to make positive returns rather than breaking even. It is also essential for health care organizations to have several payment policies so community needs are meet as well as financing prospective improvements. Additionally, facilities must keep track of accounts receivable, annual debt service coverage, bad debt, and capital spending ratios, cash debt ratios in order to determine financial viability, these concepts are part of the accounting and financial aspects of a health care organization.
In conclusion, the relationship between accounting and finance is that both work together in the creation of a health care institutions budget and operational capital analysis. Accounting is the recording, categorizing, and summarizing of events relevant to money. Finance is relevant to the managing of funds. Accounting uses a balance sheet to determine the financial position of a facility for a specific date. In addition, the outlining of revenue and debt accounts are used to illustrate whether
Open Document