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Finance & Accounting
Pages 4 (1004 words)
Student`s Name Topic Institutions` Name Introduction According to Answer.com (2013), debt financing is a process of raising money to a firm through selling bonds, mortgages, notes and borrowing from the public. In today’s world, most health care organization borrows capital with incurrence of debt to help them compete efficiently in the market…
Moreover, debt is the cheapest source of financing for long-term since it provides deductibility of interest proportion to tax and during inflation, the rate of debt repayment is cheaper. Moreover, the capital access will help to keep this facilities updated with information, technology and improve the quality initiates. However, once considered in higher levels, it will pose financial risks in the attempt to meet interest repayments and the principal. Accordingly, it becomes difficult in raising funds leading to elevated capital cost (Anwer.com, 2013). According to Fitch Rating CEO, John Well (2013), hospitals are becoming sophisticated by the use of complex debts to achieve lowered cost of debt but with certain risk of not all hospitals can afford to take the debts. As a result, Health Care Financial Management Association CEO (2013) suggests that their issue will not be different to personal investment and to avoid the succumbing to various risks, the management is being advised on scrutinizing debt structures and the current trends in the capital market. As result, they should always be considered as long as the returns it gives are much higher than its cost. ...