Transcript Review Financial Skills

Financial Skills
Financial Skills Review
Two types of budgets used in O&M
• Operating budget and the Project budget
– Operating budget is the cost to fund personnel,
supplies, equipment, and utilities
– The project budget, is used for a special project or
program, such as major construction projects, building
additions, CMMS, or major capital equipment
purchases.
Two methods for budget preparation:
• Historical
• Zero-based.
Financial
• Simple Payback (SP) requires little data
and can be accomplished quickly
• SP=Investment/Annual Net Income or
• SP=Investment/Annual Net Savings
Financial
Payback Period
• One simple method of analyzing an asset
replacement is the calculation of the
payback period
Financial
Payback Period
• P=O/I
• P = the payback period in years
• O = the original investment to acquire the
asset
• I = the average annual income after tax.
Business Case Analysis
Must Include:
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Initial Cost
Staffing
Lease Cost
Infrastructure Cost
Permits/Licenses
Maintenance
Utilities
Payback (In $ and Years)
Financial
Calculation for Energy Savings
• Energy Savings
• If your hospital saved $500 in
utility costs in 4 weeks. At the
same rate, much will you save in
8 weeks
• Simply Cross Multiply –
$500.00 x N
4
8
=
Financial
Calculation for Energy Savings
• Q: If your hospital saved $500 in utility costs in 4
weeks. At the same rate, much will you save in 8
weeks?
• A: Cross Multiply –
Set up:
$500.00 x N
4
8
=
Financial
• Life Cycle Cost Analysis – to find
the total LCC of a project, sum
the present values of each kind of
cost and subtract the present
values of any positive cash flows
such as a resale value
• LLC = first cost + M/R + energy
+ water + replacement-salvage
value
“I've got all the money I'll ever
need, if I die by four o'clock.”
Henny Youngman
Questions
thank you