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Health Care Organization: working capital management

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Working capital, or actual cash available for spending, is the key to a successful organization. In a health care organization, it is important to determine how much cash is available to run the day-to-day operations. you analyze the working capital of a health care organization of your choice.

Analyze the working capital of the health care organization you selected. Evaluate the impact of regulations, business plans, and economic dynamics on the working capital requirements of the business. Include whether or not there is sufficient working capital for business operations and explain why.

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Solution Preview

The healthcare organization selected is Cleveland Clinic Health System. We find the working capital of Cleveland by looking at the balance sheet of the clinic. According to the 2014 balance sheet the total current assets are $1.366 billion and the current liabilities are $1.451 billion. There is a negative working capital of 85 million. In simple terms it means that Cleveland has difficulty in meeting its current liabilities. Specifically, it means Cleveland will have difficulty in paying accounts payable, deposit amounts withheld from payroll, current portion of long-term debt, variable rate debt, and other current liabilities. From a broader perspective its means that fixed assets of Cleveland are being financed with short term debt. Also, if those sources that have provided short term debt ask for their money back, Cleveland will be obliged to sell is assets. For Cleveland to be financially healthy, it must have a positive working capital. From the perspective of financial health of Cleveland a negative working capital is detrimental because it means additional capital will be required simply ...

Solution Summary

The answer to this problem explains working capital management in a healthcare organization. The references related to the answer are also included.