Business of Radiology 101

Scenarios: Piggy Bank Runs Dry

It is not uncommon for companies rich with assets to go out of business due to not having sufficient cash on hand to meet their financial obligations. Conversely, companies can, in the short-term, have a net loss on their bottom line (net loss) yet still generate sufficient cash to meet their financial obligations.

• Notice that while net income is negative (a net loss) in years 2-5, annual cash flow is positive. How can this be?
• EXPLAIN

*  all values represent 1,000s of dollars.
			Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Net Revenues	Δ
Cost of Sales
Operating Expenses	Δ
Operating Profit (EBIDAT)
Interest Expense
Earnings before Deprec, Amort & Tax (EBDAT)
Depreciation Expense
Tax
Net Income
Cash Flow (cumulative)
Cash Flow (annual)
Net Present Value of Cash Flow	discount rate
Return on Investment
Acquisition Cost			Price	Renovation	IT / PACS	Sales Tax	TOTAL
		$
Scanner Useful Life (yr)
Scanner Residual Value (% of new price)
Financing (Loan) Details			Money Down	Principal	Rate	Term (yr)
	Down Payment
Interest Payment (annual, not monthly)				Year 1	Year 2	Year 3	Year 4	Year 5