Imagine you are the?comptroller?of a hospital. Due to the reduction in reimbursement from third-party payers, your organization must improve its working capi

Imagine you are the comptroller of a hospital. Due to the reduction in reimbursement from third-party payers, your organization must improve its working capital.

Watch the following 2 videos:

“Working Capital"

Transcript

“Alternative Forms of Capital"

Transcript

In my experience as a healthcare professional I can share with you that learning about working capital and how to manage it will provide you with the right understanding operational efficiencies.

You will find that it is necessary to know that daily cash requirements of the business so that you know, whether you can pay short term that and working capital will provide you with that information.

Furthermore you will find that it teaches you how to manage accounts payable.

As well as account receivables in order to optimize cash flow because cash is the king in organization working capital.

What is it working capital in assure answer is current assets minus current liabilities.

Another way of looking at working capital is in terms of a financial ratio such as working capital equates to current assets divided by current liabilities.

If it is equal to 1 that means that Karen assets equal current liabilities.

If it is greater than 1 that indicates that current assets exceed current liabilities.

And then finally if the working capital has a ratio of less than one that means that the current assets are less than the current liabilities look working capital is a nutshell is the cash required in order to meet current short-term obligations such as payroll accounts payable and any other debt that is due within a year's time.

You can Finance working capital through accounts payable how well taking longer to pay vendors in order to preserve the most precious current ass.

And that is Cash instead of paying bills in 30 days. You may do it in 60 days or 90 days. You don't want to go beyond 90 days because that will be penalties incur there or you can also pay it through that but borrowing money on a credit line. So that's the importance of working capital.

After watching the videos, respond to the discussion prompt: Given that working capital is equal to current assets minus current liabilities, how would you finance working capital through accounts payable? Provide examples.