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    Dr. Marcinko is originally from Loyola University MD, Temple University in Philadelphia and the Milton S. Hershey Medical Center in PA; as well as Oglethorpe University and Emory University in Georgia, the Atlanta Hospital & Medical Center; Kellogg-Keller Graduate School of Business and Management in Chicago, and the Aachen City University Hospital, Koln-Germany. He became one of the most innovative global thought leaders in medical business entrepreneurship today by leveraging and adding value with strategies to grow revenues and EBITDA while reducing non-essential expenditures and improving dated operational in-efficiencies.

    Professor David Marcinko was a board certified surgical fellow, hospital medical staff President, public and population health advocate, and Chief Executive & Education Officer with more than 425 published papers; 5,150 op-ed pieces and over 135+ domestic / international presentations to his credit; including the top ten [10] biggest drug, DME and pharmaceutical companies and financial services firms in the nation. He is also a best-selling Amazon author with 30 published academic text books in four languages [National Institute of Health, Library of Congress and Library of Medicine].

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    Later, Dr. Marcinko was a vital recruited BOD member of several innovative companies like Physicians Nexus, First Global Financial Advisors and the Physician Services Group Inc; as well as mentor and coach for Deloitte-Touche and other start-up firms in Silicon Valley, CA.

    As a state licensed life, P&C and health insurance agent; and dual SEC registered investment advisor and representative, Marcinko was Founding Dean of the fiduciary and niche focused CERTIFIED MEDICAL PLANNER® chartered professional designation education program; as well as Chief Editor of the three print format HEALTH DICTIONARY SERIES® and online Wiki Project.

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18 Financial Planning Tips For Physicians from a DR-CPA

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For Personal and Medical Practice Management Modernity

Dr. Gary Bode; CPA, MSA, CMP

By Dr. Gary L. Bode CPA MSA CMP [Hon] PA

http://garybodecpa.com/

http://www.CertifiedMedicalPlanner.org

1. Consider establishing an employee stock ownership plan (ESOP).

If you own a clinic or medical practice or business and need to diversify your investment portfolio, consider establishing an ESOP. ESOP’s are the most common form of employee ownership in the U.S. and are used by companies for several purposes, among them motivating and rewarding employees and being able to borrow money to acquire new assets in pretax dollars. In addition, a properly funded ESOP provides you with a mechanism for selling your shares with no current tax liability. Consult a specialist in this area to learn about additional benefits.

2. Make sure there is a succession plan in place.

Have you provided for a succession plan for both management and ownership of your medical practice, clinic or business in the event of your death or incapacity? Many business owners or physician-executives wait too long to recognize the benefits of making a succession plan. These benefits include ensuring an orderly transition at the lowest possible tax cost. Waiting too long can be expensive from a financial perspective (covering gift and income taxes, life insurance premiums, appraiser fees, and legal and accounting fees) and a non-financial perspective (intra-family and intra-company squabbles).

3. Consider the limited liability company (LLC) and limited liability partnership (LLP) forms of ownership.

These entity forms should be considered for both tax and non-tax reasons.

4. Avoid nondeductible compensation.

Compensation can only be deducted if it is reasonable. Recent court-decisions have allowed physician executives or business owners to deduct compensation when (1) the corporation’s success was due to the shareholder-employee, (2) the bonus policy was consistent, and (3) the corporation did not provide unusual corporate prerequisites and fringe benefits.

5. Purchase corporate owned life insurance (COLI).

COLI can be a tax-effective tool for funding deferred executive compensation, funding clinic or company redemption of stock as part of a succession plan, and providing many employees with life insurance in a highly leveraged program. Consult your insurance and tax advisers when considering this technique.

6. Consider establishing a SIMPLE retirement plan.

If you have no more than 100 employees and no other qualified plan, you may set up a Savings Incentive Match Plan for Employees (SIMPLE) into which an employee may contribute up to $12,500 per year if you’re under 50 years old and $15,500 a year if you’re over 50 in 2015. As an employer, you are required to make matching contributions. Talk with a benefits specialist to fully understand the rules and advantages and disadvantages of these accounts.

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7. Establish a Keogh retirement plan before December 31st.

If you are self-employed and want to deduct contributions to a new Keogh retirement plan for this tax year, you must establish the plan by December 31st. You don’t actually have to put the money into your Keogh(s) until the due date of your tax return. Consult with a specialist in this area to ensure that you establish the Keogh or Keoghs that maximize your flexibility and your annual contributions.

8. Section 179 expensing.

Businesses and medical practices may be able to expense up to $25,000 in 2015 for equipment purchases of qualifying property placed in service during the filing year, instead of depreciating the expenditures over a longer time period. The limit is reduced by the amount by which the cost of Section 179 property placed in service during the tax year 2015 exceeds $200,000.

9. Don’t forget deductions for health insurance premiums.

If you are self-employed (or are a partner or a 2-percent S corporation shareholder-employee) you may deduct 100 percent of your medical insurance premiums for yourself and your family as an adjustment to gross income. The adjustment does not reduce net earnings subject to self-employment taxes, and it cannot exceed the earned income from the business under which the plan was established. You may not deduct premiums paid during a calendar month in which you or your spouse is eligible for employer-paid health benefits.

10. Review whether compensation may be subject to self-employment taxes.

If you are a sole proprietor, an active partner in a partnership, or a manager in a limited liability company, the net earned income you receive from the entity may be subject to self-employment taxes.

11. Don’t overlook minimum distributions at age 70½ and rack up a 50 percent penalty.

Minimum distributions from qualified retirement plans and IRAs must begin by April 1 of the year after the year in which you reach age 70½. The amount of the minimum distribution is calculated based on your life expectancy or the joint and last survivor life expectancy of you and your designated beneficiary. If the amount distributed is less than the minimum required amount, an excise tax equal to 50 percent of the amount of the shortfall is imposed.

12. Don’t double up your first minimum distributions and pay unnecessary income and excise taxes.

Minimum distributions are generally required at age seventy and one-half, but you are allowed to delay the first distribution until April 1 of the year following the year you reach age seventy and one-half. In subsequent years, the required distribution must be made by the end of the calendar year. This creates the potential to double up in distributions in the year after you reach age 70½. This double-up may push you into higher tax rates than normal. In many cases, this pitfall can be avoided by simply taking the first distribution in the year in which you reach age 70½.

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13. Don’t forget filing requirements for household employees.

Employers of household employees must withhold and pay social security taxes annually if they paid a domestic employee more than $1,900 a year in 2015 (same as 2014). Federal employment taxes for household employees are reported on your individual income tax return (Form 1040, Schedule H). To avoid underpayment of estimated tax penalties, employers will be required to pay these taxes for domestic employees by increasing their own wage withholding or quarterly estimated tax payments. Although the federal filing is now required annually, many states still have quarterly filing requirements.

14. Consider funding a nondeductible regular or Roth IRA.

Although nondeductible IRAs are not as advantageous as deductible IRAs, you still receive the benefits of tax-deferred income. Note, the income thresholds to qualify for making deductible IRA contributions, even if you or your spouse is an active participant in a employer plan, are increasing.

The $100,000 income test for converting a traditional IRA to a ROTH IRA was permanently eliminated in 2010, allowing anyone to complete the conversion.

You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. If properly (and timely) rolled over, the 10 percent additional tax on early distributions will not apply. However, a part or all of the distribution from your traditional IRA may be included in gross income and subjected to ordinary income tax.

Caution: You must roll over into the Roth IRA the same property you received from the traditional IRA. You can roll over part of the withdrawal into a Roth IRA and keep the rest of it. However, the amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions) and may be subject to the 10 percent additional tax on early distributions.

15. Calculate your tax liability as if filing jointly and separately.

In certain situations, filing separately may save money for a married couple. If you or your spouse is in a lower tax bracket or if one of you has large itemized deductions, filing separately may lower your total taxes. Filing separately may also lower the phase out of itemized deductions and personal exemptions, which are based on adjusted gross income. When choosing your filing status, you should also factor in the state tax implications.

16. Avoid the hobby loss rules.

If you choose self-employment over a second job to earn additional income, avoid the hobby loss rules if you incur a loss. The IRS looks at a number of tests, not just the elements of personal pleasure or recreation involved in the activity.

17. Review your will and plan ahead for post-mortem tax strategies.

A number of tax planning strategies can be implemented soon after death. Some of these, such as disclaimers, must be implemented within a certain period of time after death. A number of special elections are also available on a decedent’s final individual income tax return. Also, review your will as the estate tax laws are influx and your will may have been written with differing limits in effect. In 2015, estates of $5,430,000 (up from $5,340,000 in 2014) are exempt from the estate tax with a 40 percent maximum tax rate (made permanent starting in tax year 2013).

18. Check to see if you qualify for the Child Tax Credit.

A $1,000 tax credit is available for each dependent child (including stepchildren and eligible foster children) under the age of 17 at the end of the taxable year. The child credit generally is available only to the extent of a taxpayer’s regular income tax liability. However, for a taxpayer with three or more children, this limitation is increased by the excess of Social Security taxes paid over the sum of other nonrefundable credits and any earned income tax credit allowed to the taxpayer. For 2015 (as in previous years), the income threshold is $3,000.

For more information concerning these financial planning ideas, please call or email us.

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ABOUT  DR. GARY L. BODE MSA CPA CMP [Hon]

Dr. Gary L. Bode was Chief Executive Officer of Comprehensive Practice Accounting, Inc., a firm specializing in providing tax solutions to medical professionals. Originally, he was a board certified podiatrist and managing partner of a multi-office medical practice for a decade before earning his Master of Science degree in Accounting from the University of North Carolina. He then served as Chief Financial Officer [CFO] for a private mental healthcare facility. Today, Dr. Bode is a nationally known Certified Public Accountant, financial author, educator, and speaker. Areas of expertise include producing customized managerial accounting reports, practice appraisals and valuations, restructurings, and innovative financial accounting as well as proactive tax positioning and tax return preparation for healthcare facilities. He has been quoted in Newsweek.

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How Stock-Brokers Execute Trades

What Every Physician-Investor Should Know

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And … Why Trade Execution Isn’t Instantaneous!

By Dr. Gary L. Bode MSA CPA CMP [Hon]; PC

Dr. Gary Bode; CPA, MSA, CMP

Many physician investors who trade through online brokerage accounts assume they have a direct connection to the securities markets.

But, they don’t. When you press “enter,” your order is sent over the Internet to your broker – who in turn decides which market to send it to for execution. A similar process occurs when you call your broker to place a trade.

While trade execution is usually seamless and quick, it does take time. And prices can change quickly, especially in fast-moving markets. Because price quotes are only for a specific number of shares, MD investors may not always receive the price they saw on their screen or the price their broker quoted over the phone. By the time your order reaches the market, the price of the stock could be slightly – or very – different.

Note: No SEC regulations require a trade to be executed within a set period of time. But if firms advertise their speed of execution, they must not exaggerate or fail to tell investors about the possibility of significant delays.

Tip: To avoid buying or selling a stock at a price higher or lower than you wanted, place a limit order rather than a market order. A limit order is an order to buy or sell a security at a specific price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. When you place a market order, you can’t control the price at which your order will be filled.

Example: You want to buy the stock of a “hot” IPO that was initially offered at $9, but don’t want to end up paying more than $20 for the stock. Place a limit order to buy the stock at any price up to $20. By entering a limit order rather than a market order, you will not be caught buying the stock at $90 and then suffering immediate losses as the stock drops later in the day or the weeks ahead.

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Caution: Your limit order may never be executed because the market price may quickly surpass your limit before your order can be filled. But by using a limit order you also protect yourself from buying the stock at too high a price. 

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ABOUT

Dr. Gary L. Bode was Chief Executive Officer of Comprehensive Practice Accounting, Inc., a firm specializing in providing tax solutions to medical professionals. Originally, he was a board certified podiatrist and managing partner of a multi-office medical practice for a decade before earning his Master of Science degree in Accounting from the University of North Carolina. He then served as Chief Financial Officer [CFO] for a private mental healthcare facility. Today, Dr. Bode is a nationally known Certified Public Accountant, financial author, educator, and speaker. Areas of expertise include producing customized managerial accounting reports, practice appraisals and valuations, restructurings, and innovative financial accounting as well as proactive tax positioning and tax return preparation for healthcare facilities. He has been quoted in Newsweek.

Conclusion

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How to Buy Securities On Margin

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How It Works and What Physicians’ Must Watch Out For

 Dr. David Edward Marcinko MBA CMP

“Buying on margin” is borrowing money from your stock-broker to buy a stock and using your investment as collateral. Physician-investors generally use margin to increase their purchasing power so that they can own more stock without fully paying for it. But, margin exposes all investors to the potential for higher losses.

https://www.amazon.com/Dictionary-Health-Economics-Finance-Marcinko/dp/0826102549/ref=sr_1_6?ie=UTF8&s=books&qid=1254413315&sr=1-6

This ME-P discusses the basics of buying on margin, some of the pitfalls inherent in margin buying, whether this financial tool is for you and how you can best use it.

How Does Margin Work?

Let’s say you buy a stock for $50 and the price of the stock rises to $75. If you bought the stock in a cash account and paid for it in full, you’ll earn a 50 percent return on your investment. But, if you bought the stock on margin – paying $25 in cash and borrowing $25 from your broker – you’ll earn a 100 percent return on the money you invested. Of course, you’ll still owe your brokerage $25 plus interest.

The downside to using margin is that if the stock price decreases, substantial losses can mount quickly. For example, let’s say the stock you bought for $50 falls to $25. If you fully paid for the stock, you’ll lose 50% of your money. But if you bought on margin, you’ll lose 100%, and you still must come up with the interest you owe on the loan.

Caution: In volatile markets, investors who put up an initial margin payment for a stock may, from time to time, be required to provide additional cash if the price of the stock falls. Investors have been shocked to learn that a broker has the right to sell the securities that were bought on margin – without any notification, and at a potentially substantial loss to the investor.

Caution: If your broker sells your stock after the price has plummeted, then you’ve lost out on the chance to recoup your losses if the market bounces back.

The Risks

Margin accounts can be very risky and they are not for everyone. Before opening a margin account, be aware that:

  • You can lose more money than you have invested;
  • You may have to deposit additional cash or securities in your account on short notice to cover market losses;
  • You may be forced to sell some or all of your securities when falling stock prices reduce the value of your securities; and
  • Your brokerage firm may sell some or all of your securities without consulting you to pay off the loan it made to you.

You can protect yourself by knowing how a margin account works and what happens if the price of the stock purchased on margin declines.

Tip: Your broker charges you interest for borrowing money; take into account how that will affect the total return on your investments.

Tip: Ask your broker whether it makes sense for you to trade on margin in light of your financial resources, investment objectives, and tolerance for risk.

Read Your Margin Agreement

To open a margin account, you must sign a margin agreement. The agreement may either be part of your account agreement or separate. The margin agreement states that you must abide by the rules of the Federal Reserve Board, the New York Stock Exchange, the National Association of Securities Dealers, Inc., and the firm where you have set up your margin account.

Caution: Carefully review the agreement before signing.

As with most loans, the margin agreement explains the terms and conditions of the margin account. The agreement describes how the interest on the loan is calculated, how you are responsible for repaying the loan, and how the securities you purchase serve as collateral for the loan. Carefully review the agreement to determine what notice, if any, your firm must give you before selling your securities to collect the money you have borrowed.

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margin risk

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Know the Margin Rules

The Federal Reserve Board and many self-regulatory organizations (SROs), such as the NYSE and NASD, have rules that govern margin trading. Brokerage firms can establish their own requirements as long as they are at least as restrictive as the Federal Reserve Board and SRO rules.

Here are some of the key rules you should know:

Before You Trade – Minimum Margin. Before trading on margin, the NYSE and NASD, for example, require you to deposit with your brokerage firm a minimum of $2,000 or 100 percent of the purchase price, whichever is less. This is known as the “minimum margin.” Some firms may require you to deposit more than $2,000.

Amount You Can Borrow – Initial Margin. According to Regulation T of the Federal Reserve Board, you may borrow up to 50 percent of the purchase price of securities that can be purchased on margin. This is known as the “initial margin.” Some firms require you to deposit more than 50 percent of the purchase price.

Tip: Not all securities can be purchased on margin.

Amount You Need After You Trade – Maintenance Margin. After you buy stock on margin, the NYSE and NASD require you to keep a minimum amount of equity in your margin account. The equity in your account is the value of your securities less how much you owe to your brokerage firm. The rules require you to have at least 25 percent of the total market value of the securities in your margin account at all times. The 25 percent is called the “maintenance requirement.” In fact, many brokerage firms have higher maintenance requirements, typically between 30 to 40 percent and sometimes higher, depending on the type of stock purchased.

Example: You purchase $16,000 worth of securities by borrowing $8,000 from your firm and paying $8,000 in cash or securities. If the market value of the securities drops to $12,000, the equity in your account will fall to $4,000 ($12,000 – $8,000 = $4,000). If your firm has a 25 percent maintenance requirement, you must have $3,000 in equity in your account (25 percent of $12,000 = $3,000). In this case, you do have enough equity because the $4,000 in equity in your account is greater than the $3,000 maintenance requirement.

But, if your firm has a maintenance requirement of 40%, you would not have enough equity. The firm would require you to have $4,800 in equity (40% of $12,000 = $4,800). Your $4,000 in equity is less than the firm’s $4,800 maintenance requirement. As a result, the firm may issue you a “margin call,” since the equity in your account has fallen $800 below the firm’s maintenance requirement.

Margin Calls

If your account falls below the firm’s maintenance requirement, your broker generally will make a margin call to ask you to deposit more cash or securities into your account. If you are unable to meet the margin call, your firm will sell your securities to increase the equity in your account up to or above the firm’s maintenance requirement.

Tip: Your broker may not be required to make a margin call or otherwise tell you that your account has fallen below the firm’s maintenance requirement. Your broker may be able to sell your securities at any time without consulting you first. Under most margin agreements, even if your firm offers to give you time to increase the equity in your account, it can sell your securities without waiting for you to meet the margin call.

  • Margin accounts involve a great deal more risk than cash accounts, where you fully pay for the securities you purchase. You may lose more than your initial investment when buying on margin. If you cannot afford to do so, then margin buying is not for you.
  • Read the margin agreement, and ask your broker questions about how a margin account works and whether it’s appropriate for you to trade on margin. Your broker should explain the terms and conditions of the margin agreement.
  • Know how much you will be charged on money you borrow from your broker, and know how these costs affect your overall return.
  • Remember that your brokerage firm can sell your securities without notice to you when you don’t have sufficient equity in your margin account.

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Medical Office Fee Strategies for Disgruntled Patients

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Adroitly Handling a Tough but Common Office Situation

[By Dr. Gary L. Bode MSA CPA]

A common scenario, in medical practice, is patient disgruntlement over professional fees.

The Scenario

This scenario should not occur in front of other patients. Many receptionists find that genuine, cute little quips like, “I know it seems high, but (wink), I’m expensive to maintain,” defuse the situation by gentling pointing out the overhead factor.

The Balk

When a patient balks at fees, gently and politely imply that we could inquire if the local plumber was available to do the exam, procedure or surgery.

Assessment

This brings training and relative cost issues into play while making them smile.  Costs are high, but justifiable.

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On Physician Relations Management [PRM] Technology

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Criteria for Selection

By Dr. Gary L. Bode MSA, CPA, LLC

Both research and experience reveals an often confusing, complicated world of claims, features, and upgrades, a wide array of technical architectures, and an even wider array of pricing structures when it comes to choosing Physician [Customer] Relations Management [PRM] software.

For me – as a medical practice management consultant – critical criteria for selection includes the following features.

Scalability:

In a young medical practice, a scalable marketing program and PRM infrastructure should be flexible enough to accommodate specialty trends effortlessly and seamlessly without crushing your marketing infrastructure or its’ people, patients or processes. A scalable PRM infrastructure should allow a new channel, a new patient segment, a medical product or service-line seamlessly and with minimum incremental effort or cost.

Interoperability:

You may need an authoring tool today to develop your collateral data, and so select a simple MSFT Word® program. Later, you may want to conduct campaigns to re-introduce your practice or gauge satisfaction among current patients through an online survey. The software you build or purchase for individual activities should be able to co-exist and talk to each other. The software you purchase does not have to be monolithic, but it needs to be modular and work together incrementally.

For example, your e-mail campaign software, CPOESs [computerized physician order entry systems] and e-prescribing functions should work with your authoring tools and eMR.

In today’s complex and fast paced evolution of PRM products, newer technologies need to co-exist with older legacy technologies, and futuristic eMR systems; so interoperability is one of the critical criteria for PRM technology selection.

Ease of Use:

As a young medical practice, pulled in different directions, it is important to have a PRM solution that is easy to use and does not necessitate extensive user training.

Cost structure:

Remember, all PRM software comes with obvious costs as well as hidden costs. Ask the right questions and find out the hidden costs for systems implementation, integration and user training.

Assessment

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Financial Ratio Liquidity Analysis for Medical Accounts Receivable

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Understanding Vital Balance Sheet and Income Statement Components

By Dr. David Edward Marcinko; MBA, CMP™

By Dr. Gary L. Bode; MSA, CPA, CMP™ [Hon]

Dr. Gary L. Bode CPA MSAFinancial ratios are derived from components of the balance sheet and income statement. These short and long-term financial ratio values are “benchmarked” to values obtained in medical practice management surveys that become industry standards. Often they become de facto economic indicators of entity viability, and should be monitored by all financial executives regularly.

Defining Terms

One of the most useful liquidity ratiosrelated to ARs is the current ratio. It is mathematically defined as: current assets/current liabilities. The current ratio is important since it measures short-term solvency, or the daily bill-paying ability of a medical practice, clinic  or hospital; etc.  Current assets include cash on hand (COH), and cash in checking accounts, money market accounts, money market deposit accounts, US Treasury bills, inventory, pre-paid expenses, and the percentage of ARs that can be reasonably expected to be collected. Current liabilitiesare notes payable within one year. This ratio should be at least 1, or preferably in the range of about 1.2 to 1.8 for medical practices.

Other Ratios

The quick ratiois similar to the current ratio. However, unlike the current ratio, the quick ratio does not include money tied up in inventory, since rapid conversion to cash might not be possible in an economic emergency. A reasonable quick ratio would be 1.0 – 1.3 for a hospital, since this ratio is a more stringent indicator of liquidity than the current ratio.

Assessment

A point of emphasis in the case of both the current ratio and the quick ratio is that higher is not necessarily better. Higher ratios denote a greater capacity to pay bills as they come due, but they also indicate that the entity has more cash tied up in assets that have a relatively low rate of earnings. Hence, there is an optimum range for both ratios: they should be neither too low nor too high.

Conclusion

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FINANCE: Financial Planning for Physicians and Advisors
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