HCS 577 WEEK 1 Financial Environments Worksheet – Online Nursing Essays
Identify one entity from each health care financial environment identified in the Financial Environments Worksheet.
Write a 1,050- to 1,400-word summary comparing the financial environments of these three entities.
Address the following for each environment:
- Describe the financial structure.
- Which policies are unique to the financial environment?
- Which financial management practices are prevalent in the financial environment?
- Explain why effective financial management is more difficult in health care than in other industries.
Format your assignment consistent with APA guidelines.
When a company first starts out, one person may handle all of the financial management responsibilities.
As the company grows, financial managers are employed to specialize in specific managerial finance responsibilities.
Financial managers direct and supervise departments of staff analysts who perform day-to-day analysis in larger organizations.
Financial managers work within the organizational structure of larger companies, as depicted in Figure 1.1.
The chief financial officer (CFO), who often reports directly to the chief executive officer, is in charge of or supervises the firm’s important financial decisions (CEO).
The structure of the finance department is depicted in the lower area of Figure 1.1’s organizational chart.
Financial Managers’ Role
Financial managers decide how to invest a company’s funds in order to take advantage of prospective opportunities.
They also figure out how to get the money they need to finance their companies’ investments.
Markets for Financial Services
Financial markets serve as conduits for money to travel between investors, businesses, and government units and agencies.
Financial firms that function as intermediaries serve each financial market.
The stock market enables corporations to sell shares to investors or amongst investors.
Some financial organizations function as brokers, facilitating trades between willing buyers and sellers of stocks at agreed-upon prices.
Debt markets allow businesses to get debt funding from institutional and individual investors, as well as transfer debt securities ownership between them.
Some financial institutions act as brokers, allowing the exchange of funds in exchange for debt instruments at a set price.
As a result, it is extremely typical for one financial institution to function as an institutional investor while another acts as an intermediary by executing the transaction that transfers funds to a company in need of funding.
For example, MerrillLynch (a financial institution) acts as an intermediary in the sale of additional shares by Intel (a company in need of capital) to investors such as the California Public Employees Retirement Fund (a financial institution).
Physical assets vs. financial assets; money vs. capital; primary vs. secondary; spot vs. futures; public vs. private; physical vs. financial assets; physical vs. financial assets; physical vs. financial assets; physical vs. financial assets; physical vs. financial assets; physical vs. financial assets; physical vs. financial assets; physical vs. financial assets
Financial Markets’ Role
Financial markets make it easier for funds to move from fund suppliers to enterprises or governments in need of cash.
Individuals’ savings are channeled through financial institutions to enterprises in need of capital.
Individuals or financial institutions that provide funds to businesses, government agencies, or individuals in need of funds are known as investors.
Our focus on investors in this book is on their provision of capital to businesses.
Individual investors frequently contribute money to companies by purchasing their securities (stocks and debtsecurities).
Institutional investors are the financial institutions that contribute the funds.
Some of these banks specialize in lending, while others frequently purchase assets issued by companies.
Investing in debt or equity instruments produced by companies is a typical way for investors to fund their investments.
Federal reserve policy, federal budget surplus or deficit, level of commercial activity, and international conditions are all elements to consider.
What is the definition of a financial market?
A market is a place where people exchange products and services.
A financial market is a place where people and organizations looking to borrow money meet up with people who have money to spare.
Funds travel indirectly from ultimate lenders [households] to ultimate borrowers [business entities, government, or other households] through financial intermediaries [banks or insurance companies] or directly through financial markets [stock exchange/bond markets].
In order for the financial system to run properly, there must be sufficient information about the markets and how they work.
The financial system acts as a conduit between saver-lenders and borrower-spenders.
Savers gain because they receive interest.
Investors have access to funds that would otherwise be unavailable.
Benefits to the economy—effective ways to connect savings and borrowers
Financial asset markets vs. physical asset markets; spot vs. future markets; money vs. capital markets; primary vs. secondary markets; public vs. private marketplaces
Markets for Financial Services
Physical Asset Markets: This is a market for wheat, automobiles, real estate, and machinery, among other things.
Stocks, bonds, notes, mortgages, and derivatives are all part of the financial asset markets.
Spot Markets: This is a market where assets are purchased and sold for immediate delivery.
Futures Markets: A futures market is one in which participants agree to acquire or sell an item at a later date.
The Money Market is a highly liquid, low-risk exchange of short-term products with maturities of less than one year.
Commercial paper—short-term liabilities of major corporations and financial institutions; Bank Certificates of Deposits—liabilities of the issuing bank that pay interest to the corporations that hold them
The Capital Market: The exchange of long-term securities—in excess of one year—generally used to secure long-term funding for capital expenditure. U.S. Treasury bills—short-term loans of the US government
The stock market is the largest segment of the capital market, and it is dominated by private and institutional investors.
Business banks and life insurance firms hold residential and commercial mortgages.
Insurance firms, pension funds, and retirement funds invest in corporate bonds.
HCS 577 WEEK 1 Financial Environments Worksheet
Investment Banks—Information and marketing specialists for newly issued securities. Primary Markets: Market for issuing a new security and distributing to saver-lenders. Initial Public Offering Market (IPO).
Markets where existing securities can be swapped are known as secondary markets.
Over-the-counter (OTC) markets are marketplaces that are not listed on the New York Stock Exchange or the American Stock Exchange (NASDAQ).
Institutions of Finance
Direct transfers, investment banking institutions, and financial intermediaries are the three methods used to transfer monies between those who have money and those who need it.
Commercial banks, savings and loan associations, credit unions, pension funds, life insurance firms, and mutual funds are all examples of financial intermediaries.
Act as agents in the movement of funds from savers-lenders to borrowers-spenders. Acquire funds by issuing their liabilities to the public and using the money to purchase financial assets. Earn profits on the difference between interest paid and earned. Diversify portfolios and limit risk.
Transaction costs are reduced.
Commercial banks are the most well-known.
Sizes range from enormous to insignificant.
The main source of money used to be public demand deposits, but today the focus is on “other liabilities.”
Accept interest-bearing savings and time deposits as well.
S&Ls (Savings and Loan Associations):
Traditionally, funds were obtained from savings deposits, which were then used to make home mortgage loans.
Perform the same activities as commercial banks, such as opening checking accounts and making consumer and corporate loans.
Credit unions are cooperatives for people who share a common interest.
Members can purchase shares [deposits] and borrow money.
Changes in the law in the early 1980s expanded their authority, allowing them to monitor [share] accounts and make long-term mortgage loans.
Concerned about the long haul are pension and retirement funds.
Receive funds from working people who are putting money into a “nest-egg” Accurate forecasting of future fund use
Invest mostly in long-term corporate bonds and high-grade shares. Diversify your portfolio to reduce risk.
Life insurance companies insure against death and get funds in the form of premiums. They use these funds based on mortality data to forecast when they will be needed.
Invest in long-term bonds for a large return.
Long-term corporate bonds and long-term commercial mortgages are two types of long-term debt.
Mutual Assets are stock or bond market-related institutions that pool funds from a large number of people to invest in a diverse range of securities while minimizing risk.
Cash flow is really important.
A revenue or spending stream that modifies the balance of a cash account over time.
In the context of personal finance, cash inflows are normally the outcome of one of three activities: financing, operations, or investment, however they can also be the consequence of donations or gifts.
Expenses and investments cause cash outflows.
This is true for both personal and commercial finances.
The health of a business relies heavily on cash flow.
“Revenue is vanity, cash flow is sanity, but cash is king,” as one saying goes.
This means that, while big inflows of revenue from sales may appear to be better, the most important goal for a firm is cash flow.
Even if they are losing money, many businesses will continue to trade in the short to medium term.
This is achievable if they can delay paying creditors and/or have enough money to cover variable costs, for example.
However, no company can last long if it does not have enough cash to cover its immediate needs.
Inflows and outflows of cash
Cash inflows (cash inflows) are used to pay for costs such as raw materials, transportation, labor, and electricity. Cash outflows are used to pay for expenditures such as raw materials, transportation, labor, and power.
The net cash flow is the difference between the two.
This might be either a good thing or a bad thing.
When a company receives more money than it spends, it has a positive cash flow.
As a result, it is able to pay its debts on schedule.
HCS 577 WEEK 1 Financial Environments Worksheet
A negative cash flow indicates that the company receives less money than it spends.
It may be unable to pay its immediate expenses and will be forced to borrow money to make up the difference.
The example illustrates the distinction between cash flow and profit.
Negative figures are indicated in brackets in accounting.
Businesses strive to generate higher financial returns than the interest generated by merely depositing money in a bank.
They can also store an excessive amount of cash.
Because cash does not earn anything, having too much of it could result in a loss of earnings.
The business’s cash status is referred to as its liquidity position.
The more liquid an asset is, the closer it is to cash.
A liquid asset is a bank account or a stock that can be quickly sold.
Buildings, for example, are the least liquid assets.
Liquid assets are ones that can be converted into cash quickly.
Cash flow is critical at any time, but it is especially critical when credit is difficult to obtain.
Financial service companies are hesitant to lend money while the economy is in a slump.
Borrowing costs rise as interest rates rise to partially offset the risk of borrowers defaulting on their loans.
Keeping track of money
Cash management is critical, and management accountants deal with a variety of cash-related issues:
ensuring that sufficient cash is accessible for investment by not locking up capital in stock unnecessarily; establishing procedures for collecting overdue obligations
Managing various amounts of cash outflows based on the size of the company.
A automobile repair shop, for example, purchases parts and tyres, but a hairdresser purchases shampoos, equipment, and pays for electricity.
In each situation, if the company is experiencing cash flow issues, it may be tardy to pay its suppliers.
This leads to more cash shortages, which extend throughout the economy.
Small suppliers may go out of business if they are not paid.
This, in turn, may have an impact on enterprises further up the food chain.
Read more at http://businesscasestudies.co.uk/cima/controlling-cash-flow-for-business-growth/the-importance-of-cash-flow.html from the Chartered Institute of Management Accountants.
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The net change in your company’s financial position from one period to the next is known as cash flow.
You have a positive cash flow if you take in more money than you put out.
If your cash outflow exceeds your cash intake, you have a negative cash flow.
Cash flow is an important indicator of a company’s financial health.
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Keeping Up With Debt When you borrow money to buy a facility, equipment, or inventory, you’re essentially using future cash flow to pay for it.
To pay off your debt obligations, you must have positive future cash flow.
Long-term loans and short-term credit accounts with vendors are widespread among businesses.
Payments are due on a monthly basis for each loan.
The requirement to make these payments on a regular basis limits your free cash flow, which is money that could be used to expand your firm.
What Effects Do Cash Flow Concerns Have on Cash Flow Performance?
Along with debt management, solid cash flow gives a company the confidence and resources it needs to invest in expansion.
Building more sites, investing in R&D, updating infrastructure, increasing technology, offering more training, and purchasing more assets and inventory are just a few of the ways your company can expand and improve with strong positive cash flow.
Having an extra cash flow situation allows your organization to function in a strategic, proactive manner rather than a reactive, defensive manner.
The movement of money into or out of a business, project, or financial product from operating, investing, and financing operations is referred to as cash flow.
It is usually measured over a defined period of time, such as an accounting period.
The calculation of various metrics that provide information about a company’s value, liquidity or solvency, and position can be done using cash flow measurement.
A company’s financial commitments cannot be met without good cash flow.
Cash inflows and outflows are important to management because they affect the amount of cash available to meet the company’s financial commitments.
Cash flow is also used by management for the following purposes:
1. To determine if a company’s liquidity is a problem.
The classic saying “cash is king” appropriately expresses the necessity of high cash flow.
The idea is that having cash puts a company in a more solid position with more purchasing power.
While a company can borrow money at times, having cash on hand protects you from loan defaults or foreclosures.
Cash flow is not the same as cash position.
Cash on hand is important, but cash flow reflects a project’s ability to earn and consume cash on a continuous basis2.
Cash flow analysis guarantees that the company is not investing in the wrong projects and that the projects are profitable3. To determine the timeliness of cash flows into and out of projects that are used as inputs in financial models such as internal rate of return and net value.
This ensures that loan principal payments and staff salaries are made on schedule.
Employees’ trust is preserved, and the credit rating is maintained. HCS 577 WEEK 1 Financial Environments Worksheet
4. Income Protection
Regardless of the external economic situation, the business or organization tends to have a steady income.
Many businesses have well-balanced books and consistent inward and outward cash flows.
Cash flows also allow businesses to respond more quickly to emerging problems or make key decisions.
When cash flows are secure, it is easier to make crucial purchases now rather than later.
It allows funds to be distributed to shareholders in the form of dividends.
This improves the relationship between the company and its owners.
Strong cash flows make a company more enticing to a lender if it wants to borrow money.
They can also provide reasonable loan conditions to entice prospective purchasers who aren’t in such a hurry for cash.
6. It prevents the company from incurring debt.
Timely cash flows are critical in keeping organizations out of debt since a timely influx of cash saves them from needing to take out loans.
7. It saves the company money on unneeded expenses.
The use of inbound and outward cash flow eliminates all needless costs such as late fees and interest rates.
8. It enables investments to be made on schedule.
Because cash inflows and outflows are timely, the organization is left with sufficient free and liquid funds to invest in time-bound instruments and securities9.