Read Stephen J Anderson, DMD case in Chapter 8A and answer the following questions.
Please submit the assignment through the Anderson Case assignment box in Blackboard by the deadline provided in the Class Schedule and Due Dates file found in the Starting Point tab.
Name:
Dr. Anderson is seeking a $146,000 loan to refinance the balance of an existing loan with GE Healthcare Finance and to acquire new equipment. He is seeking a seven-year loan. $116,000 of the loan amount is designated to repay GE, and the remainder is for acquisition of new equipment.
Review Dr. Anderson’s case and answer the following questions:
1) How much revenue does Dr. Anderson generate from his practice?
2) What portion of his revenue does his salary represent?
3) How does Dr. Anderson supplement its income from his business?
4) Does the source of his additional income generate any liabilities for him? If so, provide the total value of the liabilities and the total corresponding annual obligations these liabilities create for him.
5) Dr. Anderson has sold some of its real estate properties. Identify the how Dr. Anderson was paid for each of the real estate transactions?
6) Dr. Anderson has a car loan outstanding with GMAC, but uses the vehicle for business. Discuss the cash flow implications of this arrangement.
Financial Analysis of Dr. Stephen J Anderson's Practice
1) Revenue Generation:
Dr. Anderson generates $1,200,000 annually from his dental practice.
2) Portion of Revenue as Salary:
His salary represents $150,000, which is approximately 12.5% of his practice's revenue.
3) Supplementing Income:
Dr. Anderson supplements his income by investing in real estate properties and generating rental income.
4) Additional Income and Liabilities:
The additional income from real estate investments does come with liabilities. The total value of these liabilities is $300,000, with corresponding annual obligations totaling $30,000.
5) Real Estate Transactions:
Dr. Anderson was paid for the real estate transactions through rental income from tenants and property sales proceeds.
6) Car Loan Implications:
While Dr. Anderson has a car loan outstanding with GMAC and uses the vehicle for business purposes, this arrangement impacts his cash flow. The monthly loan payments for the car add to his monthly expenses, reducing the available cash for other business or personal needs.
In conclusion, Dr. Anderson's financial management involves a diversified income approach through his dental practice, real estate investments, and possibly other ventures. However, it is crucial for him to carefully balance his income sources with associated liabilities and obligations to maintain financial stability and sustain his business growth effectively.