Financial Healthcare
RESPONSE 1
Question by Professor: Businesses hold marketable securities (cash equivalents and short-term investments) for two primary reasons: As an interest-earning substitute for cash. As a temporary repository for cash being accumulated to meet a specific near-term need. In reality, cash management and marketable securities management are accomplished simultaneously. What are some of the advantages and disadvantages of holding marketable security both for long-term and shorten reasons?
Student 1: Jason Howard
Having a way to secure funds until needed is critical in terms of finance for all businesses. Especially when it comes to making investments that may or may not bring the business profit. One-way businesses do this is through the utilization of marketable securities.
They are typically safe, short-term securities such as Treasury bills called cash equivalents or short-term investments when listed on the balance sheet (Kristin L. Reiter & Paula H. Song. 2021) One of the main positive qualities that come with utilizing is that fact that businesses know that most of their funds if not all of them will be safe until needed. Most health services managers are willing to give up some return to ensure that funds are available, in the amounts expected, when needed Large businesses, with large amounts of surplus cash, often directly own securities such as Treasury bills (short-term debt issued by the federal government (Reiter and Song, 2021) By substituting large quantities of cash as Treasury bills, businesses are able utilize funds more easily and efficiently in terms of investments. Another great advantage of utilizing marketable securities is the fact that; Companies issuing debt do not dilute company ownership, and management maintains control over corporate operations
Advertisement Disadvantages of Debt Securities Loans must be repaid or the bondholder can take legal steps, including forcing the company into bankruptcy The amount of money a company can borrow is limited by the amount of interest it can handle (Baer, 2021) If a business is seasonal or cyclical, a firm would not be willing to borrow for a longer period (IPL.org, 2021). This could really be bad for companies that are not operational all year round. Yet another disadvantage of utilizing marketable securities is the fact that borrowing money is riskier than borrowing money long term.
References
Reiter L. K; Song H. P. (2021) Gapenski’s healthcare finance (7th Ed.) Health Administration Press, Chicago, IL 60606-6698
Retrieved from: https://www.ipl.org/essay/Finances-Advantages-And-Disadvantages-Of-Marketable-Finance-PCCVAFFAWG
Retrieved from: https://www.sapling.com/8553383/advantages-disadvantages-marketable-securities
Student 2: Vivien King
As an investor, it is always guarding at safe trading. They are not only focused on secure trading but also on market movements. Market movement is the basis on which the money released will have a positive outcome or risk. Nikitin and Elliott (2000) further argued that the control of the economic system was the market itself because it gave way to adjustment and direction (Polanyi [68]). That is in the saying that the market is about with the price is nothing but value. A market is a place where the competition takes place (Peterson & Sirri, 2002).
Market security serves as a backup for cash and volatile investment for the funds needed for landscaping. Therefore, safety is vital in meeting apparent defense. Marketable securities are the financial means with high liquidity. Marketable securities it contains a better option, especially in long term transaction. Using marketable holdings will transmit fewer cash balances in the sale. Short term is only ideal on the three months maturities. It is known for cash equivalent in the balance sheets or investment (Reiter & Song, 2021).
In the healthcare business case, the current assets and liabilities are the very center of management. The money currently stored and cash on hand is essential to support day-to-day operations. The revenue of healthcare is a system of cycle mode of payment. It is revenue that depends on the repeated business venture. Long-term market security is impeccable since the firm will not have to acquire cash more often. It will create a business power in acquisitions and opportunities. Short-term loans are riskier than long-term borrowing because the interest rate is high compared to the long-term period. The short-term renewal process that takes only three months is the dangerous part. Such interests have a constant fluctuation. On the other hand, the long-term interest rate is more stable over time (Reiter & Song, 2021).
References
Nikitin, P. V., & Elliott, J. E. (2000). Freedom and the market: An analysis of the anti-globalization movement from the perspective of the theoretical foundation of the evaluation of the dynamics of capitalism by Polanyi, Hayek, and Keynes. Forum for Social Economics, 30(1), 1-16. http://dx.doi.org/10.1007/BF02802941.
Peterson, M., & Sirri, E. (2002). Order submission strategy and the curious case of marketable limit orders. Journal of Financial and Quantitative Analysis, 37(2), 221-241. https://www.proquest.com/scholarly-journals/order-submission-strategy-curious-case-marketable/docview/211847941/se-2
Reiter, K. L., & Song, P. H. (2021). Gapenski’s healthcare finance: An introduction to accounting & financial management (7th Ed.) Health administration, Press: Chicago Illinois.