alpine village case study Essay example

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Financial Forecasting: Riverview Community Hospital
Alpine Village Clinic is a small walk-in clinic located next to the primary ski area of Alpine Village, a winter resort close to Aspen, Colorado. The clinic specializes in treating injuries sustained while skiing. It is owned and operated by two physicians: James Peterson, an orthopedist, and Amanda Cook, an internist (Gapenski and Pink, 2009). The clinic has an outside accountant who takes care of payroll matters, but Dr. Cook does all the other financial work for the clinic. However, to help in that task, the clinic recently hired a part-time MBA student, Doug Washington.
First Bank of Aspen is the primary lender of Alpine Village and due to a forecasted reduction
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Thus, no tax payments are built into the clinic’s cash budget.
The clinic has to maintain a minimum cash balance of $50,000 at First Bank because of compensating balance requirements on its term loan. This amount, but no more, is expected to be on hand on January 1, 2010. A monthly budget may not reveal the full extent of the borrowing requirements actually needed (Gapenski and Pink, 2009). To see if her concern is valid Dr. Cook suggested that Doug construct a daily budget for the month of January as a test case. A required maximum loan of $48,250 is shown on the monthly cash budget, but a required maximum loan of $150,024 will be required on the daily budget on January 15 because cash outflows occur on the 1st and 15th, as stated from the additional info from the clinic (Gapenski and Pink, 2009). So yes, the monthly budget monthly budget does not reveal the full extent on borrowing, but it is minor as the loan balance on the daily budget comes to down to $48,250. Based on the information Doug has given to us, if no commitment fee is required, the clinic should get a large line credit of $400,000. But if there is a fee on the size of the line, a smaller line is recommended. It is recommended $200,000, because it covers the amount of the 20% below forecasts. Also, it is important to consider getting estimates in projections of cost reductions if utilization falls. Likewise, Alpine