HCA 610 Module 5 DQ 2 Financing risk often must be addressed when an organization is least equipped to deal with it and limited in its options.

HCA 610 Financing risk often must be addressed when an organization is least equipped to deal with it and limited in its options.

HCA 610 Module 5 DQ 2

Financing risk often must be addressed when an organization is least equipped to deal with it and limited in its options. The interrelationship of asset-side and liability-side risks is a critical issue for hospital leadership. Give an example of how you would use a best practice approach to balance sheet management, giving careful consideration to management of asset/liability risks and returns in concert with one another.

Answer:

For example, consider an acute care hospital that has to find short-term sources of capital to fund urgent needs such as payroll, or pay off large debts that are coming due soon. This hospital has limited cash reserves and credit lines, but has a strong balance sheet overall, with good assets and little debt.

The hospital could use its assets as collateral for a loan from a bank. However, this would require taking on more debt than the hospital can afford at this point in time, which could hurt its credit rating if it does not pay off the loan quickly enough. Another option would be to sell off some of its assets at a discount to raise cash quickly. This may be necessary if there are no other short-term solutions available; however, selling assets could also hurt their value in the long term if they are sold at below market value or sold too quickly (i.e., before market conditions improve), which will leave them with less money than needed for future operations down the road.

Question:

HCA 610 Module 5 DQ 2