Capital Budgeting Process
HSM 340 – Health Services Finances
November 28, 2012
Organizations that decide to issue bonds generally go through a series of steps. Discuss the six steps.
The six steps are: the borrower who is the health care evaluates the capacity of its debts, brings to date its capital plan, and tries to get its house in together, the borrower who is the health care chooses the main parties whom will take part in the bond issuance, the borrower who is the health care, is checked by a credit rating agency, the credit rating agency rates the bond, the borrower who is the health care, starts a loan agreement with the governmental authority, whoever issues the bonds and, the bonds are sold at the public offering price by the underwriters to bondholders, the trustees give the health care provider with the net proceeds. (Zelman, McCue, & Glick, 2009)
An alternative to traditional equity and debt financing is leasing. Leasing is undertaken primarily for what purposes?
Leasing is undertaken for four reasons: they wish to avert the bureaucratic delays of capital budget requests, to get better maintenance service, to avert technological obsolescence, and so it can have convenience. (Zelman, McCue, & Glick, 2009)
Discuss the two major types of leases.
The two major types of leases are operating and capital. With an operating lease, one would use this type if you wish to lease service equipment for periods shorter than the equipments economic life. These can be anywhere from a few days to a year. When one uses a capital lease, which can also be called a financial lease, they wish to lease it for all their economic life. This means the lessee must be committed to lease payments for the entire lease period. (Zelman, McCue, & Glick, 2009)
Discuss the terms short-term borrowing and long-term financing.
When someone has to borrow, they should follow a rule of thumb and that is if you...
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