$8$: deveLOP tHe strategic financiaL PLan The eighth step in the corporate planning process and the last step in the strategic plan$-$ning stage is for the governing body and CEO to develop the strategic financial plan. The strategic financial plan is the link between the strategic plan, which looks three to ten or more years out, and the operating plan, which looks one year out. In essence, the strategic financial plan is the quantification of a series of strategic planning policy decisions that will answer whether the organization can make progress toward accomplishing its strategic plan over the next ten years. These decisions are based on the answers to the following questions regarding the five$-$year planning horizon $($Berger $2007)$: How much cash should the organization have five years from now $($days cash on hand ratio$)?$

$$ How much debt can the organization afford to take on five years from now $($debt service coverage ratio$)?$

$$ What profitability targets are necessary to meet the cash and debt metrics identified $($operating margin and excess margin ratios$)?$

$$ What is the required level of operating change necessary to meet the profitability targets identified $($projected increases in net revenues and decreases in operating expenses$)?$

$$ What are the organization$$s strategic capital requirements over the next five years $($five$-$year capital spending projection$)?$

$$ What is the financing method for the capital necessary to meet the capital requirements identified $($debt$,$ equity, lease, or philanthropy$)?$

All of the industry ratios identified earlier can be obtained by rating agencies, which might rate the hospital in the future if part of the financing will be dependent on bonds. Progress toward these ratios is also an excellent way for the governing board to evaluate the CEO on an annual basis $($Nowicki $2004).$