1.Organizations that decide to issue bonds generally go through a series of step

Question

1.Organizations that decide to issue bonds generally go through a series of steps. Discuss the six steps.

2.An alternative to traditional equity and debt financing is leasing. Leasing is undertaken primarily for what purposes?

3.Discuss the two major types of leases.

4.Discuss the terms short-term borrowing and long-term financing.

5.What are the primary sources of equity financing for not-for-profit healthcare organizations?

6.The capital budgeting process occurs in several stages, but generally includes what?

7.Discuss and list the three discounted cash flow methods.

Explanation / Answer

Answer 1 :- The six steps are :-
1. The borrower who is the health care evaluates the capacity of its debts prepares for the issuance process.
2. The healthcare provider gets evaluated by credit rating agency.
3. The bond will then be rated by a bond rating agency.
4. The borrower who is the health care , starts a loan agreement with the governmental authority who will issue the bond.
5. The bonds are sold at the public offering price by the underwriters to bondholders.
6. Then the trustees give the healthcare provider with the net proceeds .

Answer 2 :- Leasing is undertaken primarily when the Compnay does not want to buy the equipment and leases out one. Sometimes company does not want to buy an equipment which will depreciate and is not worth paying interest and paying when it is not worth the money. therefore company saves for paying negative equity. Moreover the company will pay less interest in leather rather than on the bank loan which will be raised for buying the equipment.

Answer 3 :- The two major types of leases are :-

Capital Lease :- It is the one in which the lessor only finances the leased asset and all the other rights of ownership transfer to the lessee. In this the lessee gets an option to buy the equipment at a very low price. The lessee is the owner and therefore claims depreciation and interest expense

Operating Lease :- In this lease ownership is retained by the lessor during and after the lease term. No option to buy the equipment. The lessee gets only right to use. Risk and benefits are with the lessor.

Answer 4 :-

Short Term Borrowing :- This is a debt that is incurred by the company that is due within one year . It consists of usually short term bank loans . It is shown in Current Liabilities in the Balance Sheet of the Company.

Long Term Borrowings :- These are the loans and the borrowings that are made by the company which lasts over one year . It consists of basically the financing or the leasing obligations.

Answer 5 :-

The primary sources of equity financing for not-for-profit healthcare organizations are :-

Raising Equity Capital through Government Grants and Charitable Constitutions , individuals as well as companies

Answer 6 :- Capital Budgeting includes identifying and then evaluating Capital Projects for the Company . the corporate decisions that impact future earnings of the company are understood through Capital Budgeting. It helps in understanding the Cash Inflows and Cash Outflows of the company. Different proposals are analysed and monitored are implementation

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