A for-profit hospital, has a high degree of business risk the preferred method of financing growth would be ?


a. Short-term debt
b. By increasing leverage
c. Bonds
d. Equity
e. Long-term debt

The preferred method of financing growth for a for-profit hospital with a high degree of business risk would typically be to minimize the financial risk and increase stability. In this case, the preferred method would be to use long-term debt (option e) as a means of financing growth.

Explanation:

1. Short-term debt (option a) is typically used for temporary financing needs or to manage short-term cash flow gaps. Since a for-profit hospital has a high degree of business risk, they would need a more stable and long-term financing option.

2. By increasing leverage (option b), the hospital would be taking on more debt relative to its equity. While leverage can be beneficial in some cases, it also increases the financial risk, which may not be suitable for a for-profit hospital with a high degree of business risk.

3. Bonds (option c) are long-term debt instruments used to finance large-scale projects. In this case, issuing bonds could be a viable option for a for-profit hospital to finance growth, as it provides a stable and long-term source of funds.

4. Equity (option d) refers to the ownership interest in a company. While equity financing can be an option, it may dilute the current ownership or involve selling shares to outside investors. This may not be the preferred method for a for-profit hospital with a high degree of business risk, as it would be more beneficial to rely on debt financing.

5. Long-term debt (option e) is the preferred method for financing growth in this scenario. Long-term debt provides stability and allows the hospital to spread out the repayment over an extended period, making it more manageable. It also reduces the immediate financial risk associated with short-term debt.

Overall, while other financing options may be suitable in certain situations, for a for-profit hospital with a high degree of business risk, long-term debt would be the preferred method of financing growth.