Respondto at least two of your colleagues' postings and continue the Discussion through Day 7. Expand on this Discussion by providing additional insights or alternative perspectives to your colleagues' postings.

Colleagues post

Analysis of Ontario Hospital Association Working Capital

The Ontario Hospital Association (OHA) shares a view with us of their yearly budget for 2019/20 and a three-year forecast. For the 2019/20 budget, we are privy to total revenue of $19,646,000 and total expenditures of $22,807,000 (Ontario Hospital Association, 2019). Given the total income and expenses, we can surmise that the working capital for the year is ($3,161,000).

In reviewing the three-year forecast data for the OHA, we see the additional forecasting for 2020/21 and 2021/22. For the 2020/21 revenue, there is a projected total of $21,637,000 and a projected expenditure total of $21,922,000 (Ontario Hospital Association, 2019). Similar to 2019/20, OHA finds itself in another negative year scenario with a ($ 285,000) loss. Looking at the 2021/22 numbers, we see that OHA has revenues totaling $22,968,000 and expenses of $22,714,000 (Ontario Hospital Association, 2019). True to the form of the last two years, OHA is showing a negative working capital of ($254,000).

Impact Evaluation of Working Capital Requirements

OHA paints a picture of a time for innovation and reinvention in their 2019/2020 Budget and Operating plan. Because this is a large company with a large project, OHA must identify the relevant cash flows since this will include new capital investment. In the three-year projection, the company uses an incremental cash flow process that reflects upon the specific era of a one-year time frame with measured differences from year to year for the specified timeframe (Pink & Song, 2019). In the case of our three-year projections, we see that the initial implementation year has the most significant loss of ($3,161,000), followed by the next year of ($285,000), and at the end of the third year, a loss of ($254,000). By examining these numbers, we can visualize the incremental process as intended.

Projects of a large caliber have many considerations before implementation. OHA shares its robust plan to increase advocacy through improving its social and digital media platforms and extensive leadership training (Ontario Hospital Association, 2019). OHA will need to consider the additional capital needed for equipment such as computers and software programs to accomplish the directives of advocacy outreach and leader training. In preparing the budget using hypothetical design plans, it is prudent to maintain better control of the equipment needs and procurement process (Esquibell & Spivey, 2015). It will be necessary for the team to remember to include any shipping and installation costs into the purchase price (Pink & Song, 2019) for accuracy.

Tools that will be helpful for the project will include completing a cash flow analysis and breakeven analysis to decide if the project will be profitable and worthwhile. Another practical analysis is the return on investment because it estimates the project will be beneficial (Pink & Song, 2019). Upon continuing forward, capital expenditure and cash budgets will properly create the budgeted balance for the project (Rosemary Carlson, 2020).

Sufficient or Insufficient Working Capital

The OHA budget proposal defines its yearly plan phases as the building, launch, and stabilization phases (Ontario Hospital Association, 2019). For financial assistance, OHA will draw from reserves. Because the stated goal of the stabilization phase in year three is a return to a balanced budget (Ontario Hospital Association, 2019), it does not seem that this is a prudent project because it does not meet that goal. Although the three-year strategy is moving in an incremental process as designed, we are still retaining a loss of ($254,000) at the end of year three. There is a significant difference in loss between years one and two of $2,876,000 and years two and three of $31,000. If the subsequent years after the third continue to have the same trend, we will not have enough of a pick-up in revenue to profit from the venture. Another option is if OHA has enough reserves to pull from and is comfortable with changing their goal end date, the project may be worthwhile to them.