HCM631-0901B-01 Systems in Health Care - Phase 1 Discussion Board Essay

HCM631-0901B-01 Systems in Health Care - Phase 1 Discussion Board - Essay Example Alternative capital analysis involves assessing the various options available to raise funds for investment. This is very essential as there are a number of factors to be considered before making a decision about the source of funds. Alternative capital analysis focuses on the risks associated with each source. Also there are other non-financial factors to be considered when analyzing the sources of finance, such as ownership of the company, voting rights, decision making, etc.., In the case of Cactus Health Inc., it is essential to consider the risks associated with the capital scenarios, as the company does not have a clear risk management and there are no expenditure guidelines. Hence it is essential to choose a low risk option (Weston and Copeland, 1988). The two most appropriate capital sources for Cactus Health Inc., are Equity Shares and Debentures. As the operations of Cactus Health are diversified and there is a lot of opportunity for development, the effective way to raise additional capital is through an initial public offering and entering the stock market. An equity share represents a share of the company’s assets and a share of earnings after the claims are met. Equity shareholders are the owners of the business and have a right in the company for the percentage of shares owned by them. Also, the risk is borne by the shareholders who invest in the company. Cactus can either sell some of the existing shares or can issue new shares in order to raise some surplus finance for investing in other ventures (http://financial-dictionary.thefreedictionary.com/Equity+securities). Debentures are bonds issued to the investors in exchange for finance lent to the company. Cactus can borrow money in the form of debentures from the public, by agreeing to repay the sum by some future date. Also, Cactus has to pay an interest to the creditors (debenture bond holders) before paying out dividends to the shareholders. Hence, in this