Evaluating a Healthcare Business Venture

RUNNING HEAD: Measures Used to Evaluate

Measures Used to Evaluate a Healthcare Business Venture

BSG 507: Managerial Finance

Measures Used to Evaluate a Healthcare Business Venture

To rephrase successful entrepreneur John Russell, “The more you engage with patients the clearer things become and the easier it is for them to determine what they should be doing.” This is why the home healthcare business would be a venture that would spark my interest. Home health care provides health aides, therapist, skilled nursing services, physicians, and even sometimes social services to patients all within the home setting. I believe that a venture like this not only has been proven to help a lot of the elderly and patients with chronic disease, but also is a highly profitable and emerging in the healthcare industry. In order to truly evaluate this venture, I feel that it would be necessary to do a financial analysis of the capital investment (and similar ventures like it), along with a thorough risk analysis using both scenario and sensitivity analysis.

A financial analysis can be defined as "An assessment of the viability, stability and profitability of a business, sub-business or project (Weygandt 2007)." In regards to capital investment, a financial analysis is made up of four parts: 1. Cash flow estimation (the initial cost, costs during operation, and end cost) 2.Project risk assessment 3. Cost of capital estimation (aggregate risks of businesses' assets) 4. Financial impact assessment (the project’s financial merit).  Gapenski states that "Financial analysis provides managers with the relevant information about a capital investment’s financial impact and hence helps managers make better decisions, including decisions based primarily on maniacal factors. The financial analysis will help with estimating the cost needed for the home health venture, and it can also be beneficial analyzing the risks to ones business before making the decision.  The financial...