Informed decisions using financial analysis.
Dr. Torres is uncertain whether the $750,000 buy-in represents a sound investment, especially given his existing debt obligations. He lacks a clear understanding of the practice’s profitability relative to its capital investment and needs a reliable method to compare this opportunity against alternative investments, while also accounting for the financial burden he will now be under, and the increased debt he would need to take on to complete the buyout.
Using Golden Door Asset's ROIC Calculator, Dr. Torres input the practice's net operating profit and total invested capital to determine its return on invested capital. The ROIC was compared against his required rate of return and benchmarked against similar medical practices. This revealed that the ROIC was initially below expectations. Further analysis using the Debt-Service Coverage Ratio Calculator highlighted the strain the new debt would place on his cash flow. This led to a renegotiation of the buy-in terms, with a lower initial payment, improving the projected ROIC to 12%, finally exceeding his benchmark target.
The ROIC Calculator streamlined the process of evaluating the practice's financial performance. The Debt-Service Coverage Ratio Calculator provided essential insight into the feasibility of servicing the debt associated with the buy-in.
$150,000 potential increase in equity over 5 years with the renegotiated buy-in terms
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