***PLEASE ANSWER QUESTIONS 10-25 FOR STUDY ***

INCOME STATEMENT

How much revenue to expect for the first year?

You: How much do you think your sales will be this year?

Sarah: $111,090.00

You: And how did you estimate this?

Sarah: I charge $35/hour for personal training and $20/hour per person for group training (with a minimum of 6 people in the group). My current clientele base (20 hours a week) was achieved without any marketing. Therefore, I estimate I can get work 35 hours a week with marketing. Right now 60% of my hours are personal training and 40% is group training. I estimate working 46 weeks of the year thats 6 weeks for vacation, sick days, etc. Here is my Excel chart I did.

Weekly Total	Hours	Rate
$ 735.00	21	$ 35.00
$ 1,680.00	14	$ 120.00
$ 2,415.00
Yearly (weekly * 46)
$ 111,090.00

What are your direct expenses?

You: What are your direct expenses? For each hour you work what does it cost you?

Sarah: Costs include travel (gas, wear on my car, insurance), entry fees (e..g, to parks, etc.). I do the training at peoples homes and outside. So my costs are pretty low. And I own a lot of recreation equipment I use, or the clients have their own. I have had to rent some equipment. Right now, my costs have been $200 a week for 20 hours of work. So for 35 hours a week, I estimate it to be $350. So, over 46 weeks, I estimate my yearly costs to be $16,100.

How much do you expect your operating expenses will be? (REPEAT BUT YOU ALSO REQUIRE THIS INFORMATION FOR INCOME STATEMENT)

You: Tell me, how much do you expect your operating expenses will be? How much to run the business even if you had 0 clients?

Sarah: I will be running the business out of my home. So I am estimating 10% of my household expenses for the business.

• My mortgage, rent, is $1800/month. So that would be $180 a month or $2160/year (10%).
• I need internet and cell phone. Cell phone is $80/month. Rogers internet, fastest speed, is $89/month. So thats $3,120 a year. 10% of that is $312 per year.
• Heat/Electricity/Water is $420 a month. So thats $42 a month (10%) or $504 per year.

What sort of bank loan do you expect?

You: Above, in Question 8, we estimated that you should ask the bank for a loan of $XXX. What terms and interest rate do you expect?

Sarah: For that size of a loan, I would like to ask for a loan for 1 year as I think I can pay it back. I have looked at lines of credit. I think I can get an interest rate ranging between 7% and 10%. So I will estimate this cost at 8.5% -- the middle of that range.

FIT FORWARD PROJECTED INCOME STATMENT

REVENUE	$ ?? Question 10 ??
Cost of Goods Sold	$ ?? Question 11 ??
Gross Profit	$ ?? Question 12 ??
GROSS PROFIT MARGIN	$ ?? Question 13 ??
EXPENSES
Overhead Expenses (Indirect/Fixed):
Rent	$ ?? Question 14 ??
Phone/Internet	$ ?? Question 14 ??
Utilities	$ ?? Question 14 ??
Interest	$ ?? Question 15 ??
Total Overhead Experiences	$ ?? Question 16 ??
Depreciation	$ ?? Question 16 ??
Total Expenses	$ ?? Question 17 ??
Income before taxes	$ ?? Question 18 ??
Income tax expense (40%)	$ ?? Question 19 ??
Net Income	$ ?? Question 20 ??
Net Profit Margin	$ ?? Question 21 ??

Based on the information Sarah provided above, complete the Balance Sheet by answering these guided questions. Answer below each question and also fill in the Balance Sheet table above. Make sure you show ALL of your work towards the answer in words or numbers.

10) What are the revenues?

11) What is the cost of goods sold?

12) What is the projected Gross Profit?

13) What is the projected Gross Profit Margin?

14) Overhead expenses

a.)What are the overhead expenses (excluding interest)

b) Has Sarah correctly estimated her overhead expenses? Is there any she may have left out? Is there anything she may have included incorrectly?

15) Based on your answer to Question 8, what are the projected interest expenses for the bank loan?

16) Assuming a depreciation rate of 10% each year, what is the depreciation cost for the equipment? (Use the answer to ?? Question 4 ?? regardless if there could be errors).

17) What are total expenses?

18) What is income before taxes?

19) What is the income tax expense? Assume 40% tax rate.

20) What is the net income?

21) What is the net profit margin?

22) Is FIT FORWARD projected to be a profitable company? Why or why not?

23) Will the company make enough money for Sarah to have a reasonable yearly salary? Why or why not?

24) Do you think that the bank should give the loan? Why or why not?

25) Do you have any advice or recommendations for Sarah?