Question
Expand on this Discussion by providing additional insights or alternative perspectives to your colleagues' postings. expand on this this below Working Capital for Mayo Clinic
Expand on this Discussion by providing additional insights or alternative perspectives to your colleagues' postings.
expand on this this below
Working Capital for Mayo Clinic
Working capital is vital to a successful organization. Working capital denotes the difference between an organization's current assets and current liabilities. Experts use working capital to measure a healthcare organization's short-term financial health (Pink & Song, 2020). Mayo Clinic's total current assets for the year ended December 21, 2020, were $2,658 million, while the total current liabilities were $ 2,861 million (Ernst &Young LLC, 2021).
Therefore, as of December 31, 2020, Mayo Clinic had negative working capital of -$203 million.
Impact of Regulations, Business Plans, and Economic Dynamics on Working Capital Requirements
Many factors influence working capital. Financial regulation impacts the working capital level by increasing or reducing service charges. The Mayo Clinic business plan requires investing extra cash in short-term investments. The Clinic has multiple lines of credit for working capital to respond to unanticipated liquidity needs (Ernst &Young LLC, 2021). Business plans determine an entity's working capital level by influencing its daily undertakings (Pink & Song, 2020). Budgeting experts also consider the business plans to prioritize resource allocation (Esquibell & Spivey, 2015). Economic dynamics determine an organization's in-flow of revenues. As a result, hospitals must rank their needs during austerity to effectively manage the available budgetary allocations (Mitton et al., 2014). Thus, financial laws, business plans, and economic dynamics significantly impact a hospital's working capital needs.
Is There Sufficient Working Capital for Business Operations at Mayo Clinic
There is sufficient working capital for business operations at Mayo Clinic. Negative working capital means the hospital's current liabilities supersede its current assets. The hospital attributes this negative capital to high investments, investments under securities lending agreements, and other long-term assets (Ernst &Young LLC, 2021). Negative working capital means that Mayo Clinic is efficiently managing its working capital. Efficient working capital management enables hospitals to retain assets that do not earn interest (Rauscher & Wheeler, 2020). Hence, Mayo Clinic reinvests cash inflows in interest-earning financial instruments or uses them to decrease borrowing to improve its overall profitability, implying the availability of sufficient working capital.
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