Prepare the report. It is to include, organized and presented in a logical manner:

o quantitative analyses;

o ratio analyses

o qualitative analyses; and

o appropriate recommendations given the case facts and analyses completes.

Average Joes Gym

Background

You are an Analyst for the professional service firm, 1043 LLP. Your firm specializes in providing a wide variety of internal business solutions for different clients. After 4 months on the job, you walk into the partners office to provide him with your two week notice. Given your excellent performance over the past few months, rival professional service firm, 2083 LLP has provided you with an offer you cannot refuse by providing you with a promotion to Consultant and a significant raise. Although sad to see you go, lead partner requested assistance on one last engagement, Average Joes Gym.

Additional Information

Average Joes caters to families and gives a substantial discount for families to work out together. Families that workout together reach their goals together. Members receive 2 free training sessions with enrollment so that they may start reaching their goals as soon as they sign up. The exercise specialists that provide the training to the members hold the highest certification credentials and come from accredited universities with a specific degree focus in Exercise Science and or Health Education.

The company has experienced significant growth in the past five years due to an increase in the popularity of health and fitness among social trends. As a result Average Joes has applied to TD Bank for a $1 million long term loan in order to finance further expansion plans. Specifically, the funds would be used to purchase additional gym equipment.

Average Joes application and financial statements have been provided by Lisa Jennings, a credit analyst with TD Bank. She would like BUSI 1043 to conduct a preliminary review of Average Joes financial statements and determine whether Average Joes should proceed further into a more detailed analysis. Lisa would like BUSI 1043 to document the recommendations and supporting analysis in a report that will be maintained by the bank.

Exhibit I: Financial Statements

Average Joe's Gym Statement of Financial Position As at Dec 31
Assets	2013	2014
Current
Cash	$ 235,359	$ 134,550
Marketable Securities	$ 145,780	$ 457,206
Accounts Receivable	$ 223,450	$ 174,930
Inventory	$ 425,770	$ 355,790
Prepaid Expenses	$ 17,500	$ 19,500
Total	$ 1,047,859	$ 1,141,976
Capital
Property and Equipment, net	$ 2,756,950	$ 2,492,655
TOTAL ASSETS	$ 3,804,809	$ 3,634,631
Liabilities and Shareholders' Equity
Current
Accounts Payable	$ 294,305	$ 95,700
Accrued and Other Liabilities	$ 237,595	$ 244,760
Current Portion of LongTerm Debt	$ 375,900	$ 345,900
	$ 907,800	$ 686,360
Long Term Debt	$ 1,280,330	$ 1,601,500
Shareholders Equity
Common Shares (50,000 outstanding)	$ 595,817	$ 595,817
Retained Earning	$ 1,020,862	$ 750,953
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY	$ 3,804,809	$ 3,634,631

Average Joe's Gym
Income Statement
For the Year Ended December 31st
	2013	2014
Sales	$ 2,975,990	$ 2,575,990
Cost Of Sales	$ 1,368,955	$ 1,184,955
Gross Profit	$ 1,607,035	$ 1,391,035
Expenses
Amortization	$ 155,490	$ 125,490
General and Administrative	$ 134,500	$ 102,800
Marketing and Sales	$ 175,680	$ 155,600
Interest Expense	$ 76,820	$ 96,090
Office Expense	$ 295,980	$ 255,000
Wages and Benefits Administration	$ 315,000	$ 315,000
Total Operating Expenses	$ 1,153,470	$ 1,049,980
Operating Income	$ 453,565	$ 341,055
Gain (losses) on marketable securities	$ 25,475	$ 9,800
Impariment loss on Capital assets	$ -	$ -
Income (loss) before taxes	$ 479,040	$ 350,855
Provision for (benefit from) income taxes	$ 134,131	$ 98,239
Net Income	$ 344,909	$ 252,616
Opening Balance Retained Earnings	$ 750,953	$ 573,338
Net Income	$ 344,909	$ 252,615
Dividents	$ 75,000	$ 75,000
Closing Balance- Retained Earnings	$ 1,020,862	$ 750,953

Exhibit II Additional Information Regarding the Loan

The loan will be used to purchase $1 million in additional capital assets. The additional assets will result in an increase in revenue of 20%.

The loan will bear interest at 6%. Principal payments of $200,000 per annum will be required.

The company will withhold any dividend payments during the foreseeable future in order to support the debt to equity ratio.

The capital assets are expected to have a useful life of 15 years with no residual value.

All other fixed expenses are expected to remain consistent.

The existing loan will require a principal payment of approximately $375,900 during the upcoming fiscal year. The payment for the following fiscal year is expected to be $300,000.

Accounts receivable, inventory, prepaid expense, and accounts payable will all increase by 40% as a result of the increased sales.

The marketable securities will be converted to cash at the beginning of the year.

Exhibit III Industry Benchmarks

Ratio Industry Ave

Profitability 2014

1 Return on Equity 15.00%,

2 Return on Assets 8.00%

3 Financial Leverage Percentage 7.00%

4 Earnings per Share $4.40

5 Quality of Income 75.00%

6 Profit Margin 10.00%

7 Fixed Asset Turnover 2.00

Tests of Liquidity

8 Cash Ratio 7.00%

9 Current Ratio 1.00

10 Quick Ratio 0.75

11 Receivable Turnover 13.00

Average Days in Accounts

12 Receivable 28.08

13 Payable Turnover 19.00

14 Average Days in Accounts Payable 19.21

15 Inventory Turnover 6.50

16 Average Days in Inventory 56.15

Solvency and Equity Position

17 Times Interest Earned 5.40

18 Cash Coverage 6.30

19 Debt to Equity Ratio 1.35

Miscellaneous

20 Book Value Per Share $29.00