Issues Bonds Generally Go Through A Series Of Steps

732 Words3 Pages
Organizations that decide to issue bonds generally go through a series of steps. Discuss the six steps. In the health care industry, organizations that decide to issue bonds generally go through the following steps: Step 1: The issuer decides the type of bond to issue and how to arrange the issue. The issuer then gets ready for the issuance process. Step 2: A credit rating agency evaluates the health care institution. Step 3: A bond-rating agency then rates the bond based on terms and value. Step 4: The health care provider offers a lease to a government agency through a trustee. Step 5: The government agency delivers the lease to one or more investors. Step 6: The bond is sold to investor and the trustee gives the issuer the net proceeds (Zelman, 2003). An alternative to traditional equity and debt financing is leasing. Leasing is undertaken primarily for what purposes? Health care is a capital-intensive business and most health care institutions survive on traditional equity and debt financing. Healthcare institutions consider leasing for various reasons: to avoid the lengthy process of capital budget requests, to avoid technological delays, to benefit from maintenance services and for convenience. Discuss the two major types of leases. There are two major types of leases: operating and capital. An operating lease involves leasing service equipment for shorter periods than the fiscal life of the equipment. Operating leases are used for short-term leasing and for technological assets. Capital assets involve leasing an asset or equipment for all of its economic life. Capital lease are used for long-term leasing and for equipment that cannot become technologically obsolete (Zelman, 2003). Discuss the terms short-term borr... ... middle of paper ... budgeting decisions, firms need to take time to plan (Brown, 1992). Discuss and list the three discounted cash flow methods. Discounted cash flow is a valuation technique that discounts projected cash inflows and outflows to evaluate the potential value of an investment. There are three discounted cash flow methods: Net Present Value (NPV), Profitability Index (PI) and Internal Rate of Return (IRR). The net present value discounts all cash inflows and outflows at a minimum rate of return, which is usually the cost of capital. The profitability index refers to the ratio of the present value of cash inflow to the present value of cash outflows. The internal rate of return refers to the interest rate that discounts cash inflow projections to the present to ensure that the present value of cash inflows is equivalent to the present value of cash outflows (Brown, 1992).

More about Issues Bonds Generally Go Through A Series Of Steps

Open Document