Importance of Understanding Principles of Capital Budgeting for a Nurse Manager - Essay Example

"Importance of Understanding Principles of Capital Budgeting for a Nurse Manager" is an engrossing example of a paper on care.
Understanding the principles of capital budgeting is of benefit to managers in the nursing field. This paper analyzes the importance of understanding principles of capital budgeting for a nurse manager, describes a costly piece of equipment I would like my organization to purchase, and elucidates the strategies for demonstrating the need for this equipment to decision-makers. This paper also briefly outlines how I could use financial data and emotional appeals to demonstrate the benefits of this purchase. 

Importance of understanding principles of capital budgeting

Baker and Baker (2014) explicates capital expenditures to involve "The acquisition of assets that are long-lasting, such as equipment, building, and land" (p. 187) and capital expenditure budgets as "Usually intended to plan, monitor, and control long-term financial issues" (p. 187). Franklin (2009) notes that health organizations in the contemporary setting have been faced with difficulties in accessing funds or loans to finance their capital expenditures at realistic or affordable rates. As a result, many facilities have been forced to postpone their action plans for development. This means that funds available ought to be used efficiently. Having a clear understanding of the principles of capital budgeting acts as the basis through which nurse managers make sound decisions that maximize the efficiency of capital in their departments (Baker and Baker, 2014). According to Zismer, Sterms, and Claus (2011), there are many issues that impact capital budget decisions within healthcare facilities and these include competition. Understanding capital budgeting principles increases the competitive advantage of a facility as nurse managers understand the need to source for the purchase of new assets (Zismer, Sterms, and Claus, 2011).  For instance, facilities that own large assets such as nursing-related equipment have a competitive advantage over other organizations.     

Equipment and strategies for demonstrating its need     

There is a need for an additional Magnetic Resonance Imaging (MRI) machine in my organization to cater to the increasing number of patients. MRI is a type of equipment used to take pictures of internal body organs to be used in the identification of diseases. Patients are sometimes forced to wait in long queues as they wait for their turn. To demonstrate the need for this equipment to decision-makers, it would also be important to create a proposal clearly outlining the reasons behind the need for the equipment, the cost of the equipment, and the number of years the machine is projected to be operational. In the proposal, the expected return on the capital of the equipment should also be clearly delineated (Baker and Baker, 2014).  

Using financial data and emotional appeals

I could use financial data and emotional appeals to demonstrate the benefits of purchasing a new MRI machine. I can use cash flow analysis techniques to show how money flows over the projected amount of time the machine would be operational (Baker and Baker, 2014). Showing that the cash used for purchasing the piece of equipment would be recovered and allow the organization ample time to get a profit would create notions of fantasy alluding to the benefits of the equipment. In terms of emotional appeals, the objectives of healthcare facilities include meeting the health needs of the general population. Therefore, if the facility cares for the health of the society, then it is their obligation to purchase equipment that would help them achieve this purpose. Therefore, I would strive to make the decision-makers understand that purchasing the MRI machine is part of their obligation to society.