FINANCE- DR.

JAY STEPHENSON CASE

 Prepare two years of projected statements for fiscal 2001 and 2002. Plug for the Line
of Credit.

Answer: On analysis for the 2 years for the 2001 and 2002, we can find that in 2001,
the assets are more than the liabilities and equity. The difference is approximately of
$30,000. Therefore, Dr. Stephenson can add more liabilities like a loan or line of credit
in the clinic. For example, adding for equipment in the clinic to make more specific
treatments and hire another dentist. However, in 2002 the expansion is done through
loan, making liabilities and equity more than assets. Therefore, we need to add in the
cash for 2002 to balance the sheet.

 How much of a loan is needed? What type and term of loan is required? What
collateral would you take?  Is there enough?

Answer: Dr. Stephenson requested $300,000 loan requiring monthly interest $17,250
each year to be paid against it. The collateral that can be taken as the property or the
business itself including equipment.

 What is your decision? Provide support for your answer.

Answer: As the business shows significant growth with expansion, the loan should be
approved. The revenue will increase due to expansion and the business has some
equipment which can be used to increase the revenue.