Hello would need guidance on the following case analysis:

My first step will be to analyze the company's ratios vs the benchmark and elaborate on what they mean no help needed in this area

Would need help with the entries should the loan go through and the adjusted trial balance, and income statement

Would also need help with the statement of cash flows before and after

i will then analyze and see if the loan helps the ratios

Please let me know if I have missed something or if you would elaborate in other areas

Thank you

You are an Analyst for the professional service firm, BUSI 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 partner's office to provide him with your two-week notice. Given your excellent performance over the past few months, rival professional service firm, BUSI 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 Justin Medakiewicz requested assistance on one last engagement:Average Joe's Gym.

Additional Information

Average Joe's 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 Joe's 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 Joe's 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 Joe's financial statements and

determine whether Average Joe's 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.

Lisa: "Average Joe's has provided us with a copy of their most

recent Balance Sheet and Income Statement (Exhibit I). I know this may not be

enough to make the final decision, but it should be more than enough for you to

get started."

You: "Yes, I can obtain much information from these two

statements".

Lisa: "Okay, that's great. I took a quick look at the Balance

Sheet and am wondering what has caused the change in cash. Cash is needed to

pay back the loan. Although I haven't done any rigorous analysis, it is a bit

concerning to see the cash decline by such a large amount."

You: "I can definitely look into the decrease in cash."

Lisa: "It may also be useful to give some thought to what the

Balance Sheet may look like of the loan is approved. Historical statements are

fine, but they will not be able to provide you with this information.

Additional information on the use of the loan is provided in Exhibit II."

You: "That is a great point. I will take this into

consideration."

Lisa: "Alright. Let me know if I can be of any further

assistance. I look forward to reading your report. If you recommend proceeding

with further due diligence, can you prepare a list of additional information

that would be useful in making our final decision?"

You: "Yes, I can most certainly do that. I will get started

right away."

You are excited with this last assignment and want to leave BUSI

1043 with a good impression. You begin to conduct some preliminary research by

requesting industry comparable from the bank. You have located various industry

ratios that can be used as a benchmark (Exhibit III).

Exhibit I - Financials

Current Assets 2014 2013

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 Equiment, Net 2,756,950 2,492,655

Total Assets 3,804,809 3,634,631

Liabilities and Shareholders Equity 2014 2013

Current

Accounts Payable 294,305 95,700

Accrued And Other Liabilities 237,595 244,760

Current Portion of Long-Term Debt 375,900 345,900

Total 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 Earnings 1,020,862 750,953

Total Liabilities and Shareholders Equity 3,804,809 3,634,631

Income Statement 2014 2013

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

Impairment loss on capital assets 0 0

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

Dividends 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.

Appendix 3 - Industry Benchmark

ROE

15.00%

ROA

8.00%

Financial Leverage %

7.00%

Earnings/Share

$4.40

Quality of Income

75.00%

Profit Margin

10.00%

Fixed Asset Turnover

2

Cash Ratio

7.00%

Current Ratio

1

Quick Ratio

0.75

Receivable Turnover

13

Average Days in AR

28.08

Payable Turnover

19

Average Days in AP

19.21

Inventory Turnover

6.5

Average days in Inv.

56.15

Times Interest Earned

5.4

Cash Coverage

6.3

Debt/Equity Ratio

1.35

Book Value/Share

$29.00