locus specifically on what aspects of an organization\'s finances? 2.What specif
ID: 2555949 • Letter: L
Question
locus specifically on what aspects of an organization's finances? 2.What specific tasks does sa manager undertake when handling working capital issues? undert 3. What are the three primary reasons an organization holds cash or cash equivalents? 4. What is the accounts receivable cycle? Why is this task especially important for health care organizations? 5. What is the goal of the EOQ? How does it differ from JIT inventory? 6. What are the steps in managing the revenue cycle? 7. Should an organization take a discount of 1.5/10 N/30 on a $9,000 invoice or simply pay the bill when due?Explanation / Answer
1. Working capital is a financial technique it focuses on the operational liquidity of the business. Working capital = current assets - current liabilities. If current assets are such that they are able to meet the current liabilities then the company iz considered to have operational liquidity. If current liabilities are greater than current assets then it is having working capital deficiency.
It focuses on the management of current assets and Current liabilities, so that there is never a deficit.
2. Manager's address the working capital issues by:
A. Managing cash to cash cycle time : it is the time taken to turn the raw materials into sales and then cash. It should be optimum, too long means working capital is stucked up for a long time. And too short means probable there is some sales loss.
B. Inventory optimization: manager's now a days balance demand and supply of the product. It is like to have sufficient inventory on hand to meet the customers demand but not a penny more.
3. 3 primary reasons of holding cash are:
A. Transaction motive: to fulfill current disbursement needs of the business in case disbursement exceeds receipts.
B. Precautionary motive : to hold cash as a safety margin which would act as financial reserve in times of unpredictable and unanticipated events.
C. Speculative motive : need to hold cash in order to take advantage of any bargain purchase that might arise. Eg. Exchange rate fluctuations, interest rate movements.
4. The receivable cycle is the time required to collect receivables. This is an important tracking technique as it gives worthy customers sufficient time to pay and also to collect receivables in a timely manner.
This task is getting more complex in health care industry due to a lot of receipts verticals, ICD's 10 coding requirements, The Affordable Care Act, and the need to manage relationships with many payors both government as well as institutions.
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