Financial Analysis of Medassets Company Term Paper

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By May 2012, MedAssets long-term debts are approximately $959.94 Million.

Additionally, MedAssets secures loans that carry interest rates. With significant amount of loans that the company has secured and notes that the company has issued, the company faces interest rates risks. To mitigate the effect of risks associated with the fluctuation of the interest rates, the company enters into the series of financial instrument to guide against the risks from the loans agreement and the bond that company has issued in order to raise fund.

Due to the interests rates fluctuation, MedAssets faces the interest rates risks that could jeopardize its business operations. Typically, MedAssets faces interest rates under the borrowing agreement. A loan under the credit agreement carries the interest rates. To safeguard against the fluctuation of the interest rates, the company policy is to manage the interest cost using cost efficient method. The company enters into financial derivative to manage these risks. The company uses major capital market such as hedging and derivatives to manage the fluctuation of the interest's rates from loans and bonds. To manage the complexity of the interest rates, the company uses interest rates swap. The company also uses hedging and derivatives to reduce the impact of the interest rates on the shareholders equity. The company risk management objective is to use the interest rates swap to manage the interest rates associated with loans that the company has secured. More importantly, the company also enters into the equity derivative contract to manage the change in the market performance. Additionally, the company enters into the fair value hedging to reduce the exposure of the company assets to change in fair value. The company also enters into the cash flow hedge to reduce the impact of interest rates on the cash flow.

On January 1, 2009, MedAssets entered into the GAAP adopted hedging and derivatives.

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The company enters into the interest rate swap that amounted to $138,276 starting from June, 30 2010. On May 5, 2011, the company entered into the derivative instruments of 3% LIBOR interest rate cap. On the same year, the company entered into the three separate forward interest rates swap that carries 3-month LIBOR of 2.78%. The company uses the interest rate swap for the cash flow hedging relationship. Meanwhile, the company treats the interest rate cap as hedging as being defined by the GAAP hedging and derivatives policy. By December 31, 2011, the company recorded the interest rates swap in its balance sheet for the company valuation technique; MedAssets uses the swap for the cash flow because the company uses hypothetical LIBOR rates to project the cash flow. To guide against loss during the contract agreement, the company uses the swaps to assess the creditworthiness of each partner during the contract agreement. The strategy is to guide against the default that might have occurred during the agreement. (Donohue, 2009).

Based on the strategy that the company employs in the implementing contract agreement using swap technique, the company has been able to generate the positive cash flow. Typically, the company has been able to carry out the effective interest rate swap arrangement and by December 31, 2011, MedAssets was able to carry out the interest swap arrangement. However, the company has not recorded profit or loss from the interest rates swap arrangement as of December 31, 2011. Added to the loan agreement that the company has entered into over the years in order to raise fund for business operations, MedAssets also issue bond debts to raise fund from the public.

Conclusion

Comprehensive analysis of the stock performances of MedAssets reveals that the company.....

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