Reference no: EM133058134

Working capital management has proven to be crucial in the operations of a health firm. Nevertheless, financial managers must consider essential aspects of working capital management when determining a suitable favorable level of working capital for a hospital. To this effect, a financial manager must consider the accounts receivable described as revenues gained through money obtained from clients and debtors. The accounts receivable should be collected in a structured and timely manner to cater to its operation costs and debts (Pakdel & Ashrafi, 2019). Conversely, the financial manager ensures that a maximum cash flow is maintained by balancing payments and receivables. As a result, accounts payable is an aspect of working capital management that aims to pay out the company's expenses over the short term (Dalci & Ozyapici, 2018). The accounts receivable is primarily the money a patient owes a health facility for services provided while analyzing the component assists investors in determining the liquidity and financial stability (Singh, Kumar, & Colombage, 2017). On the other hand, accounts payable serve as a liability in the balance sheet of a health firm and thus must not be overlooked. Failure to minimize the accounts payable prevents the firm from borrowing funds to cater to short-term operational costs. As a result, balancing the two aspects ensures a company operates for an extended period.

Accounts receivable are revenues gained through money obtained from clients after the provision of services. Conversely, accounts payable is an aspect of working capital management that aims to pay out the company's expenses over the short term. Therefore, failure to minimize the accounts payable prevents the firm from borrowing funds to cater to short-term operational costs.

What impact would the inability to borrow funds to cater to the short-term operational cost have on a healthcare organization, say a hospital?