alpine village case study
Financial Forecasting: Riverview Community Hospital
Alpine Village Clinic is a small walk-in clinic located next to the primary ski area of Alpine Village, a winter resort close to Aspen, Colorado. The clinic specializes in treating injuries sustained while skiing. It is owned and operated by two physicians: James Peterson, an orthopedist, and Amanda Cook, an internist (Gapenski and Pink, 2009). The clinic has an outside accountant who takes care of payroll matters, but Dr. Cook does all the other financial work for the clinic. However, to help in that task, the clinic recently hired a part-time MBA student, Doug Washington.
First Bank of Aspen is the primary lender of Alpine Village and due to a forecasted reduction in bank deposits, First Bank has asked each of its commercial loan customers for an estimate of its borrowing requirements for the first half of 2010 (Gapenski and Pink, 2009). Dr. Cook asked Doug to come up with an estimate of the clinic’s line-of-credit requirements to submit at the meeting. A line of credit is a short-term loan agreement by which a bank agrees to lend a business some specified maximum amount. The business can borrow against the credit line at any time it is in force, which typically is no longer than one year. When a line expires, it will have to be renegotiated if it is still needed. The amount borrowed on the line, or some lesser amount, can be repaid at any time, but any amount outstanding must be repaid at expiration (Gapenski and Pink, 2009). Interest is charged daily on the amount drawn down, and often a commitment fee is required up front to secure the line. In general, lines of credit are used by businesses to meet temporary cash needs, as opposed to being used for permanent long-term financing.
Doug had to gather more information if he was going to create a cash budget spreadsheet, as Dr. Cook asked him to do once she was on vacation. Doug went on the collect the following: The clinic operates seven
Alpine Village Clinic is a small walk-in clinic located next to the primary ski area of Alpine Village, a winter resort close to Aspen, Colorado. The clinic specializes in treating injuries sustained while skiing. It is owned and operated by two physicians: James Peterson, an orthopedist, and Amanda Cook, an internist (Gapenski and Pink, 2009). The clinic has an outside accountant who takes care of payroll matters, but Dr. Cook does all the other financial work for the clinic. However, to help in that task, the clinic recently hired a part-time MBA student, Doug Washington.
First Bank of Aspen is the primary lender of Alpine Village and due to a forecasted reduction in bank deposits, First Bank has asked each of its commercial loan customers for an estimate of its borrowing requirements for the first half of 2010 (Gapenski and Pink, 2009). Dr. Cook asked Doug to come up with an estimate of the clinic’s line-of-credit requirements to submit at the meeting. A line of credit is a short-term loan agreement by which a bank agrees to lend a business some specified maximum amount. The business can borrow against the credit line at any time it is in force, which typically is no longer than one year. When a line expires, it will have to be renegotiated if it is still needed. The amount borrowed on the line, or some lesser amount, can be repaid at any time, but any amount outstanding must be repaid at expiration (Gapenski and Pink, 2009). Interest is charged daily on the amount drawn down, and often a commitment fee is required up front to secure the line. In general, lines of credit are used by businesses to meet temporary cash needs, as opposed to being used for permanent long-term financing.
Doug had to gather more information if he was going to create a cash budget spreadsheet, as Dr. Cook asked him to do once she was on vacation. Doug went on the collect the following: The clinic operates seven
References: Gapenski, L. C., Pink, G. (2009). Riverview community hospital assessing hospital performance. Cases in Healthcare Finance, 4th Edition. Health Administration Press. VitalBook file.