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Business Finance EBK HEALTHCARE FINANCE: AN INTRODUCTIO

The meaning of the statement” The cost structure should be matched with the revenue structure in order to minimize the financial risk”. Introduction: Cost refers to the amount which is given up or paid for getting something in return. Cost in business is regarded as monetary valuation of risk incurred, time and utilities consumed, resources, material, effort and opportunity forgone for delivery of goods or services and in production. All expenses are regarded as a cost whereas all costs are not considered as expenses. Revenue reflects the income which is earned out of business operation after considering deduction for returned merchandise and discounts. Net revenue is ascertained after subtracting costs from gross revenue. The company is able to match its costs with the revenue, then the financial risk will be minimized because the company is capable of at least discharging its obligation. Cost structure represents the relative proportion of the variable cost and fixed cost which is incurred by the business for providing a service. It represents the ratio of fixed cost pertaining to the variable cost. Revenue structure reflects the system of revenue of an organization or business unit. It plays an important role to identify the estimated revenue that can be generated out of an investment or business. In order to minimize the financial risk, the company should strive towards matching the cost of providing services with the revenue generated out of it. In a health care setting, the financial risk is minimized because the total revenue generated by a health care provider is not certain as it is based on the volume or number of patients treated; however, it is guaranteed that the health care provider will generate a profit. Therefore the health care provider will be able to meet its fixed obligation and the financial risk remains at minimum level.

The meaning of the statement” The cost structure should be matched with the revenue structure in order to minimize the financial risk”. Introduction: Cost refers to the amount which is given up or paid for getting something in return. Cost in business is regarded as monetary valuation of risk incurred, time and utilities consumed, resources, material, effort and opportunity forgone for delivery of goods or services and in production. All expenses are regarded as a cost whereas all costs are not considered as expenses. Revenue reflects the income which is earned out of business operation after considering deduction for returned merchandise and discounts. Net revenue is ascertained after subtracting costs from gross revenue. The company is able to match its costs with the revenue, then the financial risk will be minimized because the company is capable of at least discharging its obligation. Cost structure represents the relative proportion of the variable cost and fixed cost which is incurred by the business for providing a service. It represents the ratio of fixed cost pertaining to the variable cost. Revenue structure reflects the system of revenue of an organization or business unit. It plays an important role to identify the estimated revenue that can be generated out of an investment or business. In order to minimize the financial risk, the company should strive towards matching the cost of providing services with the revenue generated out of it. In a health care setting, the financial risk is minimized because the total revenue generated by a health care provider is not certain as it is based on the volume or number of patients treated; however, it is guaranteed that the health care provider will generate a profit. Therefore the health care provider will be able to meet its fixed obligation and the financial risk remains at minimum level.

Solution Summary: The author explains the meaning of the statement "The cost structure should be matched with the revenue structure in order to minimize the financial risk."

EBK HEALTHCARE FINANCE: AN INTRODUCTIO

EBK HEALTHCARE FINANCE: AN INTRODUCTIO

6th Edition

ISBN: 9781567938111

Author: Gapenski

Publisher: VST

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EBK HEALTHCARE FINANCE: AN INTRODUCTIO

Ch. 5.1 - Prob. 1.1STQ Ch. 5.1 - Prob. 1.2STQ Ch. 5.1 - Prob. 1.3STQ Ch. 5.1 - Prob. 2.1STQ Ch. 5.1 - Prob. 2.2STQ Ch. 5.1 - Prob. 2.3STQ Ch. 5.1 - Prob. 2.4STQ Ch. 5 - Prob. 1.1STQ Ch. 5 - Prob. 1.2STQ Ch. 5 - Prob. 2.1STQ

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