Tax exempt bonds Coursework Example | Topics and Well Written Essays - 750 words

Tax exempt bonds - Coursework ExampleAccess to working capital is critical to keep facilities current, add major information engine room systems and strengthen quality initiatives .Debt financing is a major source of capital for health care organizations. Cost of capital is a major determinant of the persona of debt financing. Bond issuing is one option of debt finance that health care organization can use to finance their projects. For financial and capital planning to be effective, hospital leading, including chief executive officers, chief financial officers and board members, must be aware of the changing conditions of the capital markets and the types of capital available. The types of debt financing include nontaxable and taxable bond offerings and such nontraditional debt offering as off-balance sheet options and participating bond transactions. A sound financial plan should include maintaining a strong equity portfolio and managing debt to minimize cost and maximize acces s to capital. The following steps allow hospitals to effectively incorporate debt financing as a agent of their strategic and financial planning process. 1. Building a financing team Building a knowledgeable financing team is the primary responsibility of the CFO. The team should be responsive to variations in the financial market including changes in spare-time activity rates, regulatory requirements and ratings activity, among other things. The team should include members from outside the organization, such as judicial counsel, underwriters, auditors, financial advisers, bond issuers and bond trustees. 2. Active management of debt and equity portfolios Hospital financial leaders must actively manage debt and equity portfolios to account for changes in the financial markets and the organizations financial performance. Senior leaders and the board should be kept abreast of the organizations financial performance, including the organizations capital outlook. 3. Evaluate debt capa city Debt capacity is the amount of debt an organization is able to sustain within its credit rating profile. The ability to incur debt is a signalise of an organizations financial strength. Determining debt capacity will help organizations strategically allocate capital and also help calculate how much capital they need to obtain from other sources. 4. Determine the appropriate mix of debt and equity financing Determining the appropriate mix of debt and equity financing is a coordination compound process which is accomplished, in part, by assessing the organizations debt capacity, the level of risk the organization is willing and able to accept and rating agency benchmarks. Financial leaders must determine the appropriate mix of equity and debt financing, including the appropriate mix of traditional and nontraditional debt, to secure the maximum amount of capital at the close favorable rates. 5. Calculate the appropriate rate mix for debt Calculating the appropriate mix of fixe d rates and variable rates is an important component of a hospitals strategic financial plan. The appropriate mix is influenced by the organizations bond ratings, availability of free cash and bond insurance, interest rates and willingness to accept risk. Fixed-rate debt is secure and becomes part of an organizations capital structure until it matures. Variable rates are historically lower than fixed rates, resulting in savings to the organization, but carry no guarantee over time. Variable-rate debt is subject to changes in interest rates, regulatory activity and an organizations credit rating. 6. vary variable-rate debt Variable-rate debt can take different forms. They include variable-rate demand bonds and insured and uninsured auction rate securities,