Essay on A Report On The Cash Flow Budget

Essay on A Report On The Cash Flow Budget

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Capital
In the operating budget, the organization prepares to include the costs of acquisition of items to assist in providing goods and services in more than one fiscal year. In the case of Denison, the organization considers a capital purchase of $500,000 in oncology equipment to better serve their patients. The purchase of the new equipment will be paid immediately, however, the equipment maintains a five-year life span and expected to be used evenly over that life time (Finkler et al., 2013). After the five-year life of the equipment, the value amounts to zero because the capital item charges as an expense on a straight-line depreciation—the cost of asset spread over the useful life (Hui, 2013). The following graph illustrates the depreciation expense of the oncology equipment purchased by Denison Hospital.

Furthermore, the cash-flow demonstrates the monetary receipts and monetary expenses in a certain time period. The cash-flow budget greatly centers on viability, which relates to the organization’s generating enough cash to meet both short-term and long-term financial obligations to maintain their existence (Finkler et al., 2013). In essence, an organization generating more cash than using in their operations produces a more financially stable and viable institution (Finkler et al., 2013). Therefore, the purchase of the new oncology equipment assists Denison Hospital to increase their profits through the increase in oncology patients over the years.
Moreover, the acquisition of the new oncology equipment produces a separate capital budget. The capital budget permits the organization to input large investments in the operating budget, which provides benefits beyond the current year, due to the fact that t...


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...and goals of an institution.
The first section of the Denison case study covers the terms of accrual basis, revenue, expense, list price, and endowment to illustrate the importance of patient revenue as well as investments to the profit of the hospital in maintaining its services. The second section explains the different types of budgeting {program, line-item, flexible, capital, and cash-flow} and their influence on managers in terms of accountability and the decision-making process. Lastly, the purpose of operational budget assists in enhancing the accountability of the managers in their department’s activities and results and ensures resources are used efficiently and effectively (Finkler et al., 2013). Therefore, in order to cultivate a sustainable institution, managers must create and analyze budget(s) to understand, maintain, and improve an organization.

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