Advanced Medical Technology Corporation 1

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Jessica Betts Cecilia Hibbard Celeste Maldonado Niza Oun Jessica Betts Cecilia Hibbard Celeste Maldonado Niza Oun by by Advanced Medical Technology Corporation Advanced Medical Technology Corporation TABLE OF CONTENTS Question 1 2 Question 2 4 question 3 7 question 4 9 question 5 11 question 6 13 1. What has created the need for additional finance by AMT since 1983? Extraordinary sales growth for AMT of 30% annually is resulting in major operating losses, and external funds are necessary to be able to continue with this rapid expansion. The net operating losses from 1983-1985 were $1,289,000 in 1983; $1,176,000 in 1984; and $1,487,000 in 1985. The bulk of these losses were a direct result of both…show more content…
This aggressive spending minimizes the company’s cash on hand and indicates that while AMT is generating cash, their cash outflows are greater than their cash inflows. Mr. Haskin’s belief for the future growth potential of AMT is indicative of the fact that spending of R&D was necessary. But it may be that the excessive spending is why AMT reports negative earnings (shown below) from -9.8% in 83’ to -43.8% in 85’, resulting in inefficient use of its cash. Income Statements, 1983-85 (thousands of dollars) | | | | | | | 2-year | | | | | | | | Growth | | 1983 | % of sales | 1984 | % of sales | 1985 | % of sales | Rate | Net Sales | 13,198 | 100.0% | 21,624 | 100.0% | 30,848 | 100.0% | 52.88% | Cost of product sold | 6,825 | 51.7% | 9,682 | 44.8% | 13,989 | 45.3% | 43.17% | Gross profit | 6,373 | 48.3% | 11,942 | 55.2% | 16,859 | 54.7% | 62.65% | | | | | | | | | General, selling and administrative expenses | 6,299 | 47.7% | 11,374 | 52.6% | 14,478 | 46.9% | 51.61% | Research and development | 1,168 | 8.8% | 2,839 | 13.1% | 4,182 | 13.6% | 89.22% | Operating earnings | (1,094) | -8.3% | (2,271) | -10.5% | (1,801) | -5.8% | 28.31% | Interest expense | 501 | 3.8% | 611 | 2.8% | 634 | 2.1% | 12.49% | Sale of patents and technology | 0 | 0.0% | 1,370 | 6.3% | 627 | 2.0% | | Other income | 103 | 0.8% |
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