Finance simulation - Research Paper Example

Financial simulation Introduction The simulation provides an inordinate opportunity for nurses to learn how to make sustainable economic decisions that will ominously help them solve the issues that they face in their daily duties. It integrates various economic and financial concepts that are of utter prominence in understanding nursing management. Captivatingly, the simulation offers a wider perspective of managerial economics as it pertains to the nursing field and decision-making. Cost cutting optionChanging the skill mix and reducing agency staff were the chosen.

Changing the skill mix reduces the cost by hiring patient care technicians and nursing assistants who are unlicensed and will assist the nurses in carrying out simple tasks. Time and resources will be used meritoriously. Tapering the agency staff reduces cost and saves on premiums paid to the workers. Loan optionOption 2 was originally used to repay the loan. The interest rate of the option is low (9.0%) and will thus allow EHC to have more funds. However, it was not the preeminent alternative since interests accrued and added onto the principal amount, and everything was to be recompensed after 6 months.

Later option 1 was realized to be better since it resolved the cash flow problem and its compensation period was not limited. Equipment AcquisitionThe US machine, X-ray, and CT scanner, all needed to be replaced. The organization decided to purchase a refurbished CT scanner since its productive life is high and can be upgraded upon its expiry. The X-ray machine was purchased through a capital lease since the machines productive life is 15 years that is comparatively high. The US machine was acquired through an operating lease since the option offers low installments payment, upgrading option, and lower upfront payment.

Productivity of the assets was perceived to be more important than ownership. Extension optionThe HUD 242 proved to be better than all the other strategies and was, therefore, chosen. It offered a greater NPV. The simulation indicates that despite the higher insurance cost of HUD 242, the uncertainties associated with the investment are minimal and suitable for the project. A cost-benefit analysis further proved that HUD 242 was indeed appropriate. Tax-exempt bonds were incongruous since the funds were to be used within three years while the planned completion period of the expansion was four years.

It could have left a big chunk of WIP (work in progress) (Aiken et al., 2002). Impending RisksAll choices were potentially fatal. Management relies on the current available information and the knowledge, exposure, and experience of the policy-makers. Changing the skill mix can be devastating since employees will not be prepared to handle the current challenges experienced in the nursing industry. Reduction of nurse-patient ratio might also compromise the quality of services that patients receive.

The loyalty and moral of the workers will also be abridged. Poor decisions in deciding the purchase or expansion plans and/or schedules might challenge the organizations existence as well as cause the organization to incur huge unnecessary costs and/or losses (Aiken et al., 2002). The rapid changing economic environment and the needs of the nursing field and project management techniques must be incorporated in the decision-making processes. Advantages and disadvantagesReduction of costs helps organizations to increase their profitability and quality of services (Aiken et al., 2002). Expanding and keeping updated with the modest technologies will enable the organization to provide quality services and remain relevant in the highly competitive and challenging nursing sector.

Expansion of the organization will increase its diseconomies of scale and much of the resources will be used in meeting financial obligations rather than investing in quality service delivery. CommentsGenerally, the simulation was quite interesting and offered a clear insight into the nursing economics and management issues. The outcomes clearly indicate that decision-making is an inordinate component in the nursing environment hence policymakers must be versed with contemporary issues to ensure that poor managerial do not compromise service delivery.

ReferencesAiken, L. H., Clarke, S. P., Sloane, D. M., Sochalski, J., & Silber, J. H. (2002). Hospital nurse staffing and patient mortality, nurse burnout, and job dissatisfaction. JAMA, 288, 1987-1993.