Discussion:
Discuss the process of capital investment and the importance of capital investment decisions for health care managers today. In the Discussion, use three key terms.
Key Terms
Capital Investment Decision: Business decision involving which long-term assets to buy.
Time line:Graphic representation of time and cash flows.
Project liquidity:Ability of a project to pay for itself from the cash flows that it generates.
Discounted cash flow:Use of time-value-of-money techniques to estimate the value of an
investment.
Compounding:Process of finding the future value of a current amount of series of cash flows.
Discounting:Process of finding the present value of an amount or series of cash flows expected to be received in the future.
Return on investment:Profitability of an investment that can be measured in either dollars or percentage of return.
Post-audit:Feedback process in which the performance of projects previously accepted is reviewed and necessary changes are made.