When Miller considered Chang’s Clinic to be an opportunity, he desired to research the ability in obtain a loan so he could pursue the American dream. It is loyalty that keeps the dental business alive and growing and Despite Miller being the new guy telling clients to say ah, he anticipated he would grow substantially (50% of 04-05) within the first year. After reading this assumption it immediately told me he’s confident in obtaining the loyalty of Chang’s clients. I’m not a dentist, but I assumed this loyalty was imperative to survival and makes this business profitable. After reviewing the income statement and balance sheet provided, that was determined to be a fair assumption. Chang acquired this …show more content…
However, neither the bank nor I are his family, so we must look beyond the growth aspect alone and crunch the necessary numbers to see if we concur.
After reviewing the principles, the risk of the loan must be weighed by analyzing the numbers and sheets provided. With the data and text given, I created a pro-forma income statement and balance sheet (attached) and compared them with the industry average from 2005. Regarding the income statement with Millers predictions of growth, commitment to reduce associate fees, personal salary, and new amortization of the company, Miller would have a net income of $244,681 (Changes relative to interest expense, dental supplies, and the removal of bad debt were included in this figure). This net is 16% higher than the industry average for 2005, which is a sign that it’s relatively more profitable than others. This is from the operating expenses being 10% lower than the industry average. Due to his commitment to hard work, and the experienced staff expected to stay on board, this clinics net should continue to grow even after 2006. The number that threatens approval on the loan is the goodwill valued at $296,000 by Chang. This is concerning because it’s an intangible asset which is 80% higher than the industry average when related as a percentage of assets. This also contributes to a 30% higher LTD average when compared with the industry in 2005. These numbers are relevant but subjective because the