Working Capital Management in Health Care

Working Capital Management

in Health Care

2005 Working Capital Management

In Health Care

I . Introduction

Imagine the way Amazon .com , the most successful e-company besides e-Bay financing their operation . In the end of 90s , the Amazon .com have been known as a huge online book stores worldwide although we got surprised to see that the company continued recording financial losses for several years . During the end 20th century , the company recorded losses amounting of millions to thousands of millions dollar

How could the company resist the storm before finally

making profits commencing the 21th century ? Jeff Bezos , the CEO and founder of Amazon .com , is the person behind the implementation of financial strategy we know as budgeting and forecasting that make the Amazon .com still exists today

By definition , Capital budgeting is a business tool that allows any company to create budget amounts and then find out how well the company holds those amounts ( Forecasting and Budgeting ' n .d . For this reason , budgeting becomes an important skill for any people conducting business to prevent a company experiences cash shortage

According to Jane Smith , the reason of conducting budgeting is to anticipate times when a business needs to incur a great amount of expenditure before the company was paid by customers . Any shortage of cash will put the company in a dangerous situation

This situation refers to the need of providing enough working capital for a company to fund their day-to-day activities . The appropriate working capital also helps the company to finance their product and services improvement , technological invention , network expansion , and so many other things that help them to strengthen their presence and hence position in the markets

II . Working Capital

II .1 Understanding Working Capital

As explained above , company needs to provide enough working capital to ensure that the company is able to finance their activities . The main sources of working capital are the HYPERLINK "http /www .bized .ac .uk /learn /business /accounting /busaccounts /notes /cass -ex .htm " current assets since this kind of assets are short-term in nature so that a company could convert this capital easily into cash (Working Capital ' n .d

In addition to current assets , the company also has HYPERLINK "http /www .bized .ac .uk /learn /business /accounting /busaccounts /notes /clia s-ex .htm " current liabilities as the results of the company expenses when investing some machines or gadgets to help the company conduct their activities . Therefore , a company 's working capital can be written as following

Working Capital Current Assets - Current Liabilities

In which current assets equals to stock debtors cash

In to ensure that a company could finance their activities appropriately while preventing the company from financial collapse therefore , they need to plan careful plan their capital structure

II .2 Capital Structure

A hospital has to pay attention to three important elements : efficiency equity , and quality . The situation suggests that hospitals although some of them appeared to be non-profit need enough working capital to ensure that hospital could continue their activities . In facts...