Accounting Slideshow Assignment

Read Me First HCA/270

Week Nine

Introduction

Over the past 8 weeks, you have learned about financial management from the health care manager’s role. In this role, you have performed data analysis and used it to formulate responses regarding staffing allowances, budgeting, valuation, and contractual allowances based on revenue sources. We have reviewed the benefits and limitations of financial statements. In this last week, you will utilize these new skills to develop a presentation on the financial aspects of implementing an electronic medical record (EMR) for a physician group practice. As a health care manager, knowing how to evaluate an organization’s financial status is necessary to determine the feasibility of implementing new technology. Capital budgeting is another concept that is important in completing this task.

This week in relationship to the course and the program

This week, your readings focus on capital budgeting. Long-term investments are worthy of special attention, because they frequently require large initial investments. In addition, it is important to note that the cash expenditure needed often precedes the receipt of any profits by a considerable period of time. In such cases, we must calculate the profitability of the investment, such as implementing an EMR. We want to be sure that the profits from implementing an EMR are greater than what we could have received from alternative investments or uses of our money. Basically, it is evaluating opportunity cost. All of these elements are essential management activities that assist the organization in running smoothly.

HINTS FOR A READING STRATEGY OF THE ASSIGNED MATERIALS

During this final week, take time to review any material you are having difficulty understanding. You will work on your final project and the capstone discussion question, so a clear understanding of the concepts and material covered over the course is essential. Prepare any questions to ask your fellow students or the facilitator about which you need clarification.

Some questions to ask as you hone your critical thinking

As you read the material, ask yourself Why and What questions that assist you in applying the concepts. Ask yourself the following questions:

1. What is capital budgeting? How is it important to the overall stability of an organization?

2. What evaluation methods are needed to determine the organization’s ability to afford a large capital purchase?

3. How does the reliability of revenue sources affect capital budgeting?

4. What are the organization’s financial goals? How does this capital expenditure fit in with the organizational strategy?

5. As a financial manager, what financial management skills are necessary to undertake the evaluation of a capital expenditure?

SUMMARY

After this week, you will have the basic tools needed to understand the importance of capital budgeting, even for future organizational strategies. The final project focuses on how managers can evaluate long-term projects and determine whether the expected return from the projects is great enough to justify taking the risks that are inherent in long-term investments. Several different approaches to capital budgeting have been discussed throughout the course. These are the payback method, the net present value method, and the internal rate of return method.

The financial data needed for investment or project analysis is cash flow information for each year of the investment's life. However, we cannot be certain about the total cost of the project or how much revenue the project will generate. There is no perfect solution, so we must make estimates. We must be cognizant of the fact that our estimate may not be completely accurate; there is an element of risk. Project analysis must assess whether the expected return can compensate for the risks we are taking. To adequately evaluate projects, discounted cash flow techniques should be utilized. Considering the time value of money is an essential calculation.

In summary, financial managers use a formalized approach to evaluate the time value of money. This approach is necessary to evaluate the problems we face in capital budgeting. Capital budgeting represents one of the most important areas of financial management. If projects are implemented and they do not generate adequate revenue to sustain the investment, it will have serious long-term consequences on facilities’ ability to remain viable.