Hca Holdings Harvard Case Solution & Analysis

Question: Whatisthe total amountof moneyowed to HCAbyitscustomers forservicesthattheyhave received as of December31,2016?


The total amount of money owed to HCA by its customers for services that they have received as of December 31st 2016 is approximately 10,814 million. The net receivables presented in the balance sheet are of 5,816 million which are added in the allowance for doubtful debts of 4,988 million in order to compute the total receivables owed by the customers of HCA.


Question: Based on information provided on the Balance Sheet, what percentage of HCA’s accounts receivable outstanding on December 31, 2016 will not be collectible, according to management’s estimate?
Hca Holdings Harvard Case Solution & Analysis


Based on the information provided in the balance sheet as of December 31st 2016 it is estimated that the HCA will not receive almost 46.13% of their receivables which are owed by the customers.


Question: How, in your opinion, does a company’s credit policy affect the following?


Question: Total amount of its accounts receivables


It can be said that the total amount of accounts receivable of an entity depends on various elements in which the credit policy of the management and industry practices are the primary factors which can affect the total accounts receivable. If the credit policy of an entity is very defensive which means the company give little or no credit.The amount of its receivables are expected to be very high and the chances of bad debts are very lower. Whereas, if the credit policy of the company is customer favorable and aggressive and the company give extensive credit period and amounts, the chances of bad debts are substantially higher. There is a direct relation between the accounts receivable days and bad debt expense, the higher the customers will take to settle the receivables the more the chances of receivables being uncollectable.


Question: The amount of the allowance for doubtful accounts


As discussed above the amount of doubtful accounts are likely to increase if the credit policy of an entity is very aggressive and the doubtful receivables are likely to decrease if the company tightens theircredit policy. The ability of the company to receive the balances owed by the customers is affected if considerable amount of credit and large credit period is given to customers thus increasing the amount of allowance for doubtful debts. As opposed to this, the amount of allowance for doubtful debt will decrease if the large credit period is not given to the customers and credit is given on lower amounts......................

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