Advanced Medical Tech Co

Advanced Medical Technology Corporation

Background:

AMT developed, manufactured and sold scientific medical instruments, needles and catheters. Mr. Haskins (president of AMT) was in need of an $8 million loan in earl 1986 because of lack of available funds. Management had previously met financing pressures by relying heavily on short-term credit, leasing some manufacturing facilities, and by establishing a connection with Biological Labs, Inc., a leading pharmaceutical firm. The officer reviewing the loan application observed that a pattern of losses for AMT seemed to be a direct result of Mr. Haskins’ determination to spend heavily on r&d and on marketing.

Major Problems:

The major problem for AMT is the amount of overspending on the operating expenses. AMT specifically overspends on its research and development and marketing. This amount of overspending in these operational accounts is restricting AMT’s ability to profit instead of incur a loss for each fiscal year.

Alternative Courses of Action:

AMT could lower its expenses in a couple of its operational accounts to a degree that does not significantly hinder that department while loosening some its operational revenue and allowing the company to experience a positive net earnings for each year.

Analysis of Alternatives:

By reducing the amount spent each year on operating accounts such as research and development and marketing, the company will be able to maintain a positive level of sales increase while freeing up enough operational revenue to ensure a positive net earnings for each fiscal year.

Suggested Course of Action:

Reduce spending of r&d and marketing by at least 5%. This is a modest number that will affect net earnings in a positive manner and not have dramatic negative results on each respective department immediately.

| |3 Year average | | | |avg w 5% decrease in exp | |...