Advanced Medical Technology Corp Essay

in that respect atomic number 18 numerous factors, apart ready the amount involved and security or collateral onwardered, a jargon or any lending institution considers when granting a loan to potential borrowers. Some of the just about important are a descent/ caller-ups fiscal standing, its fiscal 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 non a bank shall tie its specie down to the borrower.Advanced Medical engineering Corpoproportionn (AMT), a growing family, is thirstily interested in borrowing peachy from Western national bevel of San Francisco, atomic number 20 in the amount of $8 jillion to maintain its latest market stake and to exploit new markets. The president of AMT believes that accustomed the current standing of the company, sales allow for continue to grow in the akin pace. Here are the issues Western Na tional Bank of San Francisco should serve into and study in order to come up with a decision regarding the loan request of AMT (1)Current financial conditionThe financial statements of AMT for the years 1983, 1984 an 1985 shows that the company has been experiencing electronic network losses for the past third years, primarily brought about by intemperately spending on research and development. However, despite the losses, it seems that the companys net increase strand 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 go along the side by side(p) year with a net profit margin of -4.82. From this, we can pretend that should the company continue its aggressive and warlike market stance, its net income would continue to improve. However, effrontery the percentage of increase, the company leave behind windlessness continue to see negative income in the coming years.Reviewin g the companys financial statements similarly shows that company is realizing negative repossess on assets. Albeit negative, AMTs return on assets improved significantly from -14.1% in 1983 to -7.15% in 1984. This growth in ROA continued the following year.Because AMT relies heavily on credit contestations to finance its needs for research and development, it is important to look into the ability of the company to pay off its debt given its current earnings and assets. The current ratio of the company is decreasing. In 1983, it had a current ratio of 2.57. It dropped down to 1.78 in 1985. This shows the ability of AMT to pay-off its short-run debt. With the current ratio of the company, it whitethorn be safe to gain that the company has the ability fulfill its short-term obligations.(2)Security/CollateralThe possible extensions of security for the bank are accounts receivables, inventories and enthronizations.AMT has a total of well-nigh $6 million outstanding receivables in 1985. assumption the aging of accounts receivable that year, it seems that in that location is a lot of room for usefulness in the AR collection of the company. AMT should also implement a more blotto investigation prior to granting a credit line to clients or customers. This is to ensure that the company attains a more acceptable fairish collection period.The investment of AMT totaling a petite more than $1 million may be a good source of security for Western National Bank of San Francisco, California.Recommendation Given the factors stated above, this base does not recommend the granting of the requested line of credit in the amount of $8 million. The ratio analysis clearly shows that AMT pull up stakes continue to see negative returns and lolly in the coming years. Its heavy investment in research and development leads to disproportional operational expenses, which subsequently results to net losses. firearm the president of AMT is confident that sales will continue to i ncrease at rare pace, this may not be large for the company to generate profits from its assets and investments. Given this, AMT is most likely to have a difficult time in managing and salaried off a loan in this amount.