Impact of a Firm's Profitability on Obtaining External Financing

This study attempts to explain and bring out the impact of a firm's profitability, capital intensity, and growth rate have on its creditworthiness. The study also revises the financial statement forecasts for the River Community Hospital is a 210-bed, not-for-profit, acute care hospital. The study will also analyze and discuss the changes in the organization and financial statement forecasts if the hospital becomes investor own. It will also discuss the factors that have a material effect on the financial statement forecast. Keywords: External financing profitability, size, and capital intensity Introduction debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms debt financing, considering as an important source of finance for firms’ all long term and short term operating requirements of the firms External financing is considered by many firms in order to finance any deficit the firms may have in financing the everyday operations.

The growth of a firm's profits is the ultimate reward for the management. Firm owners are constantly devising new methods to increase the investment's profitability. Firms with high-profit margins can easily expand in size and create new sources for internal funding thus requiring less of external financing sources. These firms are also attractive to new investors and are better placed in negotiating the prices for the external financing to maintain their market share (Yogendrarajah, 2013). Low-profit margins are a negative and push firms to search for external sources of finance (Mina, Lahr & Hughes, 2013). Large firms have higher production levels and lower production costs compared to smaller firms. A firm operating under a group of companies is less likely to seek external finance as it has enough backing from the intra-group capital market (Mina, Lahr & Hughes, 2013).

A smaller firm that wishes to expand will have to seek for external financing to facilitate its growth. The availability of such funding will be depended on the forecast of production and market share of the firm. Ownership Changes, Investment, and Financial Forecasts The relationship between a firm's ownership structure and its performance is an important issue of consideration when it comes to corporate financing. The forecast will take advantage of the available sources of external financing and a rise in the debt management ratios. The statement forecast will also focus on the equities disbursement to the various stakeholders. The liquidity ratios for assets will be higher than that of the hospital liabilities. Instead of substituting debts for equities, an investor-owned Riverview Hospital would opt for external sources to finance the debts and use the vacant spaces as security for the extra financing.

Conclusion From this paper, and the financial statements of Riverview Hospital, the key learning points can be concluded as, the access to external financing in credit markets is affected by the firms’ financial performance, its capital intensity, and the forecasted growth rate of the firm. Determinants of Access to External Finance: Evidence from Spanish Firms [Ebook]. Retrieved from http://www. frbsf. org/publications/economics/papers/2007/wp07-22bk. pdf Knyazeva, A. The Demand and Supply of External Finance for Innovative Firms [Ebook] (4th ed. Retrieved from https://academic. oup. com/icc/article/22/4/869/754182 Yogendrarajah, R. The Impact of Capital Intensity, Size of Firm and Firm’s Performance on Debt Financing in Plantation Industry of Sri Lanka [Ebook].