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Interest-bearing savings and checking account
What are the four phases of the working capital cycle?
- 1. Obtain cash
- 2. Purchase resources and pay bills
- 3.Provide services
- 4. Billing and collections
A percentage of the unused portion of a credit line that is charged to the potential borrower
Revolving line of credit
An agreement established by the bank and the borrower that legally requires the bank to loan money to the borrower at any time requested up to the pre-negotiated limit
Normal line of credit
An agreement established by a bank and a borrower that establishes the maximum amount of funds that could be borrowed and the bank may loan the funds at its own discretion
Approximate interest rate
The annual interest rate incurred by not taking advantage of a supplier's discount offer to pay bills early.
The process of ensuring that billing claims contain all information required by an insurer before it will submit payment
A post office box located near a federal reserve bank or branch that for a fee will pick up and process checks quickly
Required cash balance
The amount of cash an organization must have on hand at the end of the current period to ensure that it has enough cash to cover the expected outflows during the next forecasting period
A table that shows the percentage of receivables outstanding by the month they were incurred
A tangible asset that is pledged as a promise to repay a loan. If the loan is not paid, the lending institution as legal recourse may seize the pledged asset
Selling accounts receivable at a discount, usually to a financial institution
What are the 3 major reasons for a health care provider to hold cash
- 1.Daily operations
- 2. Precautionary purposes
- 3.Speculative purposes
A designated dollar amount on deposit with a bank that a borrower is required to maintain
Effective interest rate
The true interest rate that a borrower pays
A short term unsecured loan made for some specific purpose
Short-term credit offered by the suppliers of a good or service to the purchaser
Short-term debt that results from supplies purchased on credit for a given length of time. This allows an organization to use the supplier's money to pay for the purchase up until the time it pays the supplier the amount owed
The amount of working capital an organization keeps on hand relative to its potential working capital obligations
How an organization chooses to finance its working capital needs
A measure of how easily an asset can be converted into cash
Current assets and current liabilities
Working Capital Strategy
How much extra working capital an organization determines it must keep as a cushion
Net working capital
The difference between current assets and current liabilities
Health Insurance Portability and Accountability Act (HIPAA)
A public law designed to improve efficiency in health care delivery by standardizing EDI and by protection the confidentiality and security of health data by setting and enforcing recognized standards
The health care organization attempts to maximize returns by investing excess funds in expectedly higher-earning non-liquid assets such as buildings and equipment
HCO seeks to minimize its risk of having insufficient short-term funds by maintaining higher liquidity
What are the main sources of temporary cash?
Bank loans and extension of credit from suppliers (i.e., trade payables)
What is an unsecured loan and two types of unsecured bank loans?
- Not backed by an asset.
- Lines of credit & transaction notes
Identify two problems that can delay the billing process?
- Patients who use more than one name or name changes.
- Address changes or no address or phone number on file
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