Healthcare Finance Term Paper

Total Length: 366 words ( 1 double-spaced pages)

Total Sources: 1

health care organizations need to develop capital budgets? What are the main steps involved in developing a capital budget?

All major business organizations dealing with economic conditions of uncertainty, opportunity costs, and scarce or depreciating resources have to develop capital budgets. The three major steps to developing a capital budget are: conducting a decision analysis to establish a base for knowledge building, establishing option pricing to secure an accurately assessed market position, and creating discounted cash flow (DCF) for making appropriate investment decisions for the organization.

No organization can manage capital projects by simply looking at the numbers of discounted cash flows.
A financial analyst for any organization must look at the entire decision and assess all relevant variables and outcomes within an analytical hierarchy. Decision-making regarding capital budgeting is increasingly complex today because of uncertainty, particularly in the health care environment where safety assessments of pharmaceuticals, health care insurance allotments, and other factors may affect the future of the organization. All capital projects will involve numerous variables and possible outcomes -- but health care perhaps more than most. (Evans, pp.1-2)….....

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