Question

1. Describe the cash conversion cycle

2. Identify the types of financial markets

3. Discuss why a health care organization would use the financial markets (hint: hospitals usually do not have sufficient cash on hand for large capital projects)

4. Calculate the total amount of interest (not PV of the interest) a non-profit hospital will need to pay on a 10 year 1 million dollar bond that pays and an annual interest rate of 3.5% (interest payments paid one time at the end of each year till maturity). The interest is paid in a lump sum at the end of each year and the principal is payable along with the last interest payment (e.g $1,035,000 is payable at the end of year 10).

Answer 1

1.Cash Conversion Cycle is a measurement that expresses the time taken for a company to convert its investment in inventory and other resources into cash flow from sales.

Cash conversion cycle cannot be directly observed in cashflows, because these are also influenced by investment and financing activities; it must be derived from Statement of Financial Position data associated with the firm's

2. financial markets are the markets that are used to raise the finance. Financial markets attracts funds from the investors and acts as a medium of channel for investors and Companies.

i) Stocks Markets which provides finance through the issuance of shares and enables investors to do trading activities.

ii)commodity markets which facilitate the trading of commodities.

iii) Money Markets which provides short term debt financing and investment.

iv) Derivative Market which provides instrument for the management of financial risk.

v) future markets  which provide standardized forward contracts for trading products at some future date.

vi) Foreign exchange markets, which facilitate the trading of foreign exchange.

v)Cryptocurrency market which facilitate the trading of digital assets and financial technologies.

vi) spot market and interbank lending market.

3. Health care organigations uses financial markets to obtain funds so as to enable them to carry out their investment plans. Health care organigations mostly uses high amount funds in research and development activities which is most crucial part in now a days. where it can be possible with the help of financial markets where it can reach with investors very easily ( Globally). ( where it allows health organigations to productive use of funds borrowed).

4. interest for 1 year = 35,000 (10,00,000*3.5/100)

interest is payable at end of each year.

total interest for 10years bond = 35000*10years = $3,50,000

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