Working Capital Management in Healthcare Essay

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Working Capital Management in Healthcare
Houma Guy.
HCS 579 Health Care Finance
September 24, 2005

Working Capital Management in Healthcare
Working capital is the money required to finance the day to day operations of an organization. Working capital may be required to bridge the gap between buying of stocked items to eventual payment for goods sold on account. Working capital also has to fund the gap when products are on hand but being held in stock. Products in stock are at full cost, effectively they are company cash resources which are out of circulation therefore additional working capital is required to meet this gap which can only be reclaimed when the stocks are sold (and only if these stocks are not replaced) and payment
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The last article we will review is “Strategies for effective capital structure management: executive summary” which appeared in August 2005 in Healthcare Financial Management. This article begins by talking about how the right capital structure supports strategic-financial goals, while optimizing flexibility and minimizing cost. While a complex task, this article provided strategies to achieve the goal. This article covers the same 8 strategies noted in the GE article but goes into detail regarding each strategy.
ORGANIZE FOR EFFECTIVE CAPITAL STRUCTURE MANAGEMENT
The essential building blocks for effective capital structure management include obtaining and providing education, establishing the team, and defining the organization's attitude toward risk.
DETERMINE THE APPROPRIATE LEVEL OF DEBT CAPACITY
Debt capacity, the amount of debt an organization is capable of supporting within a particular credit rating profile, establishes the parameters of the debt portion of the capital structure. “The amount of debt organizations are willing to incur has to be balanced against their tremendous capital expenditure needs for information technology, new inpatient capacity, outpatient facilities, and a whole host of other spending opportunities," says Randy Fuller, hospital segment manager of GE Commercial Finance Healthcare Financial Services.

DETERMINE THE OPTIMAL MIX OF DEBT-TO-EQUITY FINANCING AND TRADITIONAL-TO-NONTRADITIONAL FINANCING
Once an organization
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