3. The monthly cash budget does not provide for interest paid on loans or interest earned on cash

surpluses.

a. Modify the monthly portion of the model to include these cash flows for February to June. Assume

that interest earned (paid) occurs in the month following the end-of-month cash surplus (loan

requirement.) The IF function In Excel could be helpful.

b. What is the new maximum loan requirement and in what month? Do these cash flows have a

significant impact on estimated borrowing requirements?

4. Dr Cook is a great believer in scenario analysis and considers the cash budget produced by Doug to

be ?best case.?

a. Construct a ?worst case? cash budget and identify the maximum loan requirement.

b. What implications does the worst case cash budget have for the credit line sought from First

Bank?

5. Dr Cook believes that the surge in patient volume over the forecast period is bound to result in some

cash surpluses and what the clinic should do with them. In which types of securities should the clinic

invest cash surpluses? Describe the desired maturity, the expected returns, and the risks that would be

involved.

6. Before recommending how large a credit line to seek from First Bank:

a. What additional information about the business would you want to have and why would you want

it?

b. What additional information about the banking would you want to have and why would you want

it?

7. Based on all of your analyses, how large a credit line would you recommend that the clinic seek from

First Bank?

8. In your opinion, what are three key learning points from this case?

Cases in Healthcare Finance, 5th Edition Copyright 2014 by FACHE CASE 8 QUESTIONS MOUNTAIN VILLAGE CLINIC Cash Budgeting 1. a. Based on the monthly cash budget, what is the maximum loan requirement for January? Based on the daily cash budget, what is the maximum loan requirement for January? Why are the numbers different? b. The monthly cash budget assumes that all cash flows occur on the same day each month. Suppose the clinic's outflows tend to cluster at the beginning of the month, while collections tend to be heaviest towards the end of each month. How would this affect the validity of the monthly budget? 2. Patient volume at the clinic is highly seasonal because the vast majority of the business occurs during the ski season, which generally runs from December through March. Should seasonal variations be incorporated into the clinic's target cash balance? In other words, should the balance be higher during months when cash needs are greater? 3. The monthly cash budget does not provide for interest paid on loans or interest earned on cash surpluses. a. Modify the monthly portion of the model to include these cash flows for February to June. Assume that interest earned (paid) occurs in the month following the end-of-month cash surplus (loan requirement.) The IF function In Excel could be helpful. b. What is the new maximum loan requirement and in what month? Do these cash flows have a significant impact on estimated borrowing requirements? 4. Dr Cook is a great believer in scenario analysis and considers the cash budget produced by Doug to be \"best case.\" a. Construct a \"worst case\" cash budget and identify the maximum loan requirement. b. What implications does the worst case cash budget have for the credit line sought from First Bank? 5. Dr Cook believes that the surge in patient volume over the forecast period is bound to result in some cash surpluses and what the clinic should do with them. In which types of securities should the clinic invest cash surpluses? Describe the desired maturity, the expected returns, and the risks that would be involved. 6. Before recommending how large a credit line to seek from First Bank: a. What additional information about the business would you want to have and why would you want it? b. What additional information about the banking would you want to have and why would you want it? 7. Based on all of your analyses, how large a credit line would you recommend that the clinic seek from First Bank? 8. In your opinion, what are three key learning points from this case? 11/18/2013