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Using an affordability analysis to budget capital expenditures
1Singhvi & Associates, Inc., Dayton, OH, USA.
Summary
Healthcare organizations can determine affordable capital expenditures by conducting financial analyses. This involves assessing resources using metrics like debt-to-capital ratio to guide future investments.
Area of Science:
- Healthcare Financial Management
- Health Services Administration
Background:
- Healthcare organizations require capital expenditures for expansion and renovation.
- Assessing financial capacity for capital projects is challenging.
Purpose of the Study:
- To outline a method for healthcare financial managers to perform affordability analyses.
- To guide resource allocation for future capital expenditures.
Main Methods:
- Conducted an affordability analysis using a healthcare system case study.
- Utilized debt-to-capital ratio and debt service coverage metrics.
Main Results:
- The analysis provides a framework for evaluating capital expenditure feasibility.
- Identified key financial ratios for resource allocation decisions.
Conclusions:
- Affordability analysis is crucial for sustainable healthcare capital investment.
- Financial managers can use these methods to optimize resource allocation.