Benchmark – Capital Needs Essay
Scenario: As the administrator of a small privately owned not-for-profit hospital that has been seeing a significant increase in patient volume, it has been determined that another wing should be added to accommodate the increase in volume. However, there is not enough cash in reserves to finance the project. You have been tasked with planning how the capital required for the project can be raised.
In an essay (1,000-1,250 words) address the following prompts, citing four to six scholarly sources to support your claims:
1. Capital needs can be met either through equity or debt financing. Explain the difference between the two and which financing would be appropriate and why, considering that this is a private, not-for-profit hospital.
2. Explain the term working capital and how it is related to debt financing for capital expenditures.
3. Discuss the importance of a cash budget and how it can be used to assess the financial viability of this capital expenditure.
