Discuss the information you would need as a nurse leader before you could approve a capital purchase.

Discuss the information you would need as a nurse leader before you could approve a capital purchase.

Discussion 1: Discuss the information you would need as a nurse leader before you could approve a capital purchase.

Topic 2 DQ 1

Assessment Description

Discuss the information you would need as a nurse leader before you could approve a capital purchase.

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Topic 2 DQ 1

            Capital purchases connote money used by a setting to make a massive investment in long-term fixed assets (Raghupathi & Raghupathi, 2020). This can include buying equipment and furniture for the unit. The budgeting process for capital expenditures is crucial and the nurse leader needs to factor in some information before approving capital purchase. The first information to consider is the payback period, which represents the duration needed for the cash flows produced by the investment to pay back the cost of the initial investment (Srithongrung et al., 2021). For instance, suppose an investment of $400 will produce a yearly cash flow of $100 annually for six years, the number of years needed to recover the investment is four years. The Payback Period analysis is essential in availing the understanding of the liquidity of the investment.

            The second information that should be considered is Profitability Index (PI). PI is calculated by dividing the current value of the cash inflow and the capital investment by the current value of the cash outflow of the capital investment. If the PI is greater than one, the capital investment is adopted. If the PI is lower than one, the capital investment is rejected (Wang, 2022).  The other information is technological changes. Nurse leaders need to conduct a thorough review of the cost of new products and the productive efficiencies before making a capital purchase. The other information is competitive strategy. Where a business rival is acquiring new equipment to boost capacity, enhance efficiency, and reduce costs, a nurse leader may have to follow by opting for capital purchases for similar equipment (Greer et al., 2020). The information about the cash flow of the organization should also be considered by a nurse leader to help in identifying the appropriate time to make capital purchases.

References

Greer, S. L., Klasa, K., & Van Ginneken, E. (2020). Power and purchasing: why strategic purchasing fails. The Milbank Quarterly, 98(3), 975-1020. https://doi.org/10.1111/1468-0009.12471

Raghupathi, V., & Raghupathi, W. (2020). Healthcare expenditure and economic performance: insights from the United States data. Frontiers in public health, 8, 156. https://doi.org/10.3389/fpubh.2020.00156

Srithongrung, A., Yusuf, J. E. W., & Kriz, K. A. (2021). A systematic public capital management and budgeting process. In Research Anthology on Preparing School Administrators to Lead Quality Education Programs (pp. 598-619). IGI Global. DOI: 10.4018/978-1-7998-3438-0.ch027

Wang, Y. (2022). Evaluating digital health care startups: Forecasts and market insights. In 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022) (pp. 1298-1304). Atlantis Press. DOI 10.2991/aebmr.k.220603.210