Fargo Memorial Hospital has annual net patient service revenues of $14,400,000. It has two major third-party payers,
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Question:
a. What is Fargo's average collection period? (Assume 360 days per year throughout this problem.)
b. What is the firm's current receivables balance?
c. What would be the firm's new receivables balance if a newly proposed electronic claims system resulted in collecting from third-party payers in 45 and 75 days, instead of in 60 and 90 days?
d. Suppose the firm's annual cost of carrying receivables was 10 percent. If the electronic claims system costs $30,000 a year to lease and operate, should it be adopted? (Assume that the entire receivables balance has to be financed.)
Related Book For
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng
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