Advanced Medical Technology Corp.
There are numerous factors, apart form the amount involved and security or collateral offered, a bank or any lending institution considers when granting a loan to potential borrowers. Some of the most important are a business/company’s financial standing, its financial obligations, the purpose for borrowing, past financial dealings of the borrower and its existing businesses with other entities. All of these are important factors to determine whether or not a bank shall tie its money down to the borrower.
Advanced Medical Technology Corporation (AMT), a growing company, is eagerly interested in borrowing capital from Western National Bank of San Francisco, California in the amount of $8 million to maintain its current market position and to exploit new markets. The president of AMT believes that given the current standing of the company, sales will continue to grow in the same pace. Here are the issues Western National Bank of San Francisco should look into and study in order to come up with a decision regarding the loan request of AMT: (1)
Current financial condition
The financial statements of AMT for the years 1983, 1984 an 1985 shows that the company has been experiencing net losses for the past three years, primarily brought about by heavy spending on research and development. However, despite the losses, it seems that the company’s net profit margin has been improving in a continuing velocity. From 1983 to 1984, the net profit margin of the company improved considerably from -9.77% to -5.44%. This continued the following year with a net profit margin of -4.82. From this, we can infer that should the company continue its aggressive and competitive market stance, its net income would continue to improve. However, given the percentage of increase, the company will still continue to see negative income in the coming years.
Reviewing the company’s financial statements also shows that company is realizing negative return...
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