Financial Skills

1. Financial Skills

2. Financial Skills Review

3. Two types of budgets used in O&M • Operating budget and the Project budget • Operating budget is the cost to fund personnel, supplies, equipment, and utilities • The project budget, is used for a special project or program, such as major construction projects, building additions, CMMS, or major capital equipment purchases.

4. Two methods for budget preparation: • Historical • Zero-based.

5. Financial • Simple Payback (SP) requires little data and can be accomplished quickly • SP=Investment/Annual Net Income or • SP=Investment/Annual Net Savings

6. FinancialPayback Period • One simple method of analyzing an asset replacement is the calculation of the payback period

7. FinancialPayback Period • P=O/I • P = the payback period in years • O = the original investment to acquire the asset • I = the average annual income after tax.

8. Business Case Analysis Must Include: • Initial Cost • Staffing • Lease Cost • Infrastructure Cost • Permits/Licenses • Maintenance • Utilities • Payback (In $ and Years)

9. FinancialCalculation for Energy Savings • Energy Savings • If your hospital saved $500 in utility costs in 4 weeks. At the same rate, much will you save in 8 weeks • Simply Cross Multiply – $500.00 x N = 4 8

10. FinancialCalculation for Energy Savings • Q: If your hospital saved $500 in utility costs in 4 weeks. At the same rate, much will you save in 8 weeks? • A: Cross Multiply – Set up: $500.00 x N = 4 8

11. Financial • Life Cycle Cost Analysis – to find the total LCC of a project, sum the present values of each kind of cost and subtract the present values of any positive cash flows such as a resale value • LLC = first cost + M/R + energy + water + replacement-salvage value

12. “I've got all the money I'll ever need, if I die by four o'clock.” Henny Youngman

13. Questionsthank you