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Aggressive Working Capital Policy

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An aggressive working capital policy, may increase the entity's return, but it also increases the risk.

1. Please solve this Net Income Problem.

A firm has the following accounts:

Net patient revenue = $1,500,000
Supply expense = $200,000
Depreciation expense = $100,000
Salaries and benefits = $700,000
Other expenses = $200,000
Net accounts receivable = $150,000

What is the net income for the period?
Hint: Net accounts receivable is not an expense it is a income.

2. Targeted debt to equity ratio problem: A hospital issues $20 million in bonds and $60 million in equity to finance a new project. Its targeted debt to equity ratio is?

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Working Capital Policy- Conservative versus Aggressive

What are the relative advantages and disadvantages of a conservative working capital policy and an aggressive working capital policy?

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