The Elijah Heart Center (EHC) is a hospital located in New York that specializes in cardiac care. At the current time, it is facing a potential shortfall in working capital. It is the responsibility of the chief financial officer (CFO) to understand the reasons for this shortfall and how to avoid a great loss for the institution. In the current simulation, three phases were given to help understand the role of a CFO, and attempt to make the necessary decisions to help the institution become financially successful.
Phase I: Capital Shortage In phase I, the CFO was asked to choose two cost-cutting solutions in order to increase cash flow. In an attempt to reach a savings goal of $750,000, the first recommendation was to reduce the proportion …show more content…
The first piece of equipment to consider was a high-speed CT scanner. The choice made was to acquire this machine through an operating lease. This option was chosen because of the impression that technology associated with this equipment changes rapidly. After reviewing the analysis, it was understood that this type of equipment has a useful life of approximately ten years. By purchasing a refurbished high-speed scanner, the institution could save money by avoiding an upgrade fee after three years and obtain the equipment through a lower interest rate. (University of Phoenix, 2015) The second equipment reviewed was the x-ray machine. The best-perceived option was to utilize a new equipment loan to purchase this piece of equipment as technology does not change rapidly. However, after reviewing the analysis, it was ascertained that this equipment was best purchased by obtaining a good deal through a capital lease program especially since its useful life was approximately 15 years. The last piece of equipment to be purchased, the ultrasound system, was correctly chosen to be obtained through an operating lease because of the lower payments at the beginning. The assessment agreed with the analysis, and further discovered that this type of equipment has a useful life of approximately five years. The institution will have the latest technology even though they may be paying …show more content…
In the future, to successfully complete this simulation, additional time will be required to research the different possibilities and understand the impact each decision has on the long-term outcome of the hospital. Also, when applying the lessons learned from this simulation to future financial roles, it will be important to understand each option and compare them side by side to make the right decision. It is also important, as someone new to making financial decisions, to have mentors that will guide your decision making. With additional experience, decisions encountered in this simulation will become