Peace of Mind Through Financial Preparedness
Dr. Sharma's medical practice recently experienced a temporary dip in revenue due to a new competitor entering the market. While she expects revenue to rebound, she needed to understand how long her practice could operate solely on its liquid assets, especially with overhead costs averaging $30,000 per month. She also needs to determine a strategy to address the deficit while ensuring the practice can still operate.
By using the Defensive Interval Ratio calculator, Dr. Sharma determined her practice could operate for 2.5 months without new revenue, given its current cash reserves and accounts receivable. Armed with this knowledge, she strategically implemented cost-cutting measures and proactively negotiated a line of credit, increasing her operational runway to 4 months. Further, She realized that her A/R collection was slow and she decided to implement a new faster system.
Dr. Sharma inputted her practice's liquid assets (cash, marketable securities, accounts receivable) and average daily operating expenses into the calculator. The result provided a clear, actionable metric for understanding the business's short-term financial health.
$30,000+ in potential losses avoided by proactively managing cash flow and securing a line of credit, ensuring the practice's survival during the revenue dip. Additionally, A/R was improved by an estimated 15% for an increase of $15,000.
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