Sources of Funds for Hospitals: Retained Earnings, Debt Capital, and Equity Capital

Planning & Managing
Resources

Table of Contents
Question 2........................................................................................................................................3
REFERENCES................................................................................................................................1

Question 2
Sources of funds is the term used to refer to the actual origin of the funds that are used by
a business. These sources are essential to a business as it helps in its growth and development.
These are also known as contributing resources towards the ongoing development and
continuation of company’s programs, projects, etc. funds may be required by an organization for
short, medium or long term needs.
Planning for resources is the main area over which the management of the hospital should
focus so that it can be able to provide right care to its customers (North and et.al., 2022). The
resources of the company are limited so there should be effective management of resource in
order to have sufficient resource available for each activity of the hospital. Financial risk is the
that is associated with the fact that the invested amount can be lost the business.
The relationship between the resource planning and management of resources and the
performance of individuals and team within the organization is negative. This can be explained
as more the hospital will plan and manage its resources more will be the rigidity related to their
use and therefore the performance of teams, individuals, and the overall organization will fall.
Further in absence of management the situation will be of extreme adversity so it is essential to
plan for the resources in optimal level (Yusopa and et.al., 2020). The factors that influence the
decision making process in managing funding by healthcare setting are cost involved, financial
stability of the hospital, and the legalities applicable. There are three sources of funding that can
be used by the hospital for meeting its long, medium and short term requirements.
Retained Earnings
The most primitive source of raising funds used by an organization is maximization of its
profits by making an increase in its selling price and earning more amount of money for the same
products and services that are produced by the incurrence of same costs. Then the company
decides what is to be done with the earnings it managed to earn. There are two options available
to a company it can distribute the earnings as dividends to its shareholders or it can also retain
that amount in the company (Ruan and et.al., 2018). A company may not distribute all its
earnings of a financial year in form of dividends among its shareholders. Alternatively, it can
retain its earnings into the organization itself, this is known as retained earnings. Company’s aim
behind doing so is to save some funds that can be used in future. It is also known as ploughing