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Article: Debt-Maturity Structures Should Match Risk Preferences.(Statistical Data Included)
- Article from:
- Healthcare Financial Management
- Article date:
- December 1, 1999
- Author:
CopyrightCOPYRIGHT 1999 Healthcare Financial Management Association. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Key to any debt-maturity matching strategy is financing assets with the appropriate debt structure. Financial managers need to establish an optimal capital structure and then choose the best maturity-matching structure for their debt.
Two maturity-matching strategies that are available to healthcare financial managers are the accounting approach and the finance approach. The accounting approach, which defines asset maturities as current or fixed, is a riskier financing strategy than the finance approach, which defines asset maturities as permanent or temporary The added risk occurs because of the accounting approach's heavy reliance on short-term debt. The ...