W4 Discussion 2: Certainty And Inflation Healthcare Financia

W4 Discussion 2 Certainty And Inflationhealthcare Financial Managemen

Discuss your answer to the following question: is it better to receive money today or money in the future? Include the principles of certainty, inflation, and opportunity cost in your response. Respond to the initial question by day 5 and post two additional times to peers and/or instructor by day 7. The initial post should be a minimum of 150 words. References should be included if external sources are used, and responses should be well-written with proper grammar, punctuation, sentence structure, and spelling.

Paper For Above instruction

Deciding whether it is better to receive money today or in the future is a fundamental question in financial management, especially in healthcare finance where timing of cash flows can significantly impact decision-making. This decision hinges on several core principles: certainty, inflation, and opportunity cost.

Certainty refers to the assuredness that the expected monetary amount will be received as planned. Money received today provides a sense of certainty because the value is immediate and tangible. Conversely, money in the future involves uncertainty; there is always a risk that the anticipated amount may not materialize due to economic factors or default risks. For healthcare organizations and individuals alike, certainty influences risk management and investment strategies, making immediate cash more desirable from a risk perspective.

Inflation plays a critical role in the valuation of future money. Inflation erodes purchasing power over time, meaning that a dollar received today will generally buy more than a dollar received in the future. If inflation rates are high, the value of future cash flows diminishes, making immediate receipt more attractive. Conversely, in periods of low inflation, the difference in value between present and future money narrows, potentially making future payments more acceptable.

Opportunity cost—the potential benefits missed out on when choosing one alternative over another—is another essential consideration. By accepting money today, an individual or organization can invest or utilize these funds immediately to generate returns or meet urgent needs. Delaying receipt means foregoing these opportunities, which could include earning interest or making strategic investments, especially relevant in healthcare where timely funding can impact service delivery and operational efficiency.

From a practical perspective, the choice between present and future payment involves applying the concept of the time value of money (TVM). Discounting future cash flows to their present value helps compare the worth of money across different time periods. Typically, the present value of a future sum decreases as the discount rate increases, reflecting higher opportunity costs and inflation expectations.

In conclusion, while the reward of receiving money today is often higher due to certainty, inflation, and opportunity cost considerations, the context and specific financial circumstances also influence this decision. A comprehensive analysis considering these principles assists healthcare managers and individuals in making informed financial choices that align with their risk tolerance and strategic goals.

References

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• Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. Wiley.
• Higgins, R. C. (2018). Economics of Money, Banking, and Financial Markets (12th ed.). Pearson.
• Ross, S. A., Westerfield, R. W., & Jaffe, J. (2021). Corporate Finance (12th ed.). McGraw-Hill Education.
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• Investopedia (2023). Present Value (PV). Retrieved from https://www.investopedia.com/terms/p/presentvalue.asp