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. werage Joe's Gym Background You are an Analyst for the professional service firm, 1043 LLP. Your firm specializes en 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, 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 Joe's Gym Additional Information Average Joe's caters to families and gives a substantial discount for families to work put together. Families that workout together reach their goals together. Members Foccive 2 free training sessions with enrollment so that they may start reaching their zoals 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 S1 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 Tennings, a credit analyst with TD Bank. She would like BUSI 1043 to conducta 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 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 payback the loan. Although 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 usefl 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 o provide you with this information. Additional information on the use of the loan is provided in Exhibit I." 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 to proceed 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 comparables from the bank. You have located various industry rates that can be used as a benchmark (Exhibit empression. You begin to conduct some preliminary research by requesting industry compare from the bank. You have located various industry rates that can be as a Rickstark (Exhibit III). Exhibiti: Financial Statements Average Joe's Gym Statement of Financial Position As at Dec 31 2013 2014 Assets Current S Marketable Securities Accounts Receivable Inventory Prepaid Expenses Total 235.359 $ 145,780 S 223,450 $ 425,770 S 17.300 S 1,047.859 $ 134550 457,206 174.930 355.790 19.500 1,141,976 $ Capital Property and Equipment, net TOTAL ASSETS S $ 2.756,950 3.804,809 $ $ 2,492,655 3,634,631 Liabilities and Shareholders' Equity Current Accounts Payable Accrued and Other Liabilities Current Portion of Long-Term Debt 294 3055 237 595 $ 375.900 S 907.800 $ 93.700 244.760 345,900 686 160 Long Term Debt $ 1.250,330 $ 1.601,500 Shareholders Equity Common Shares (50,000 outstanding) Retained Earning TOTAL LIABILITIES AND SHAREHOLDERS EQUITY Average Joe's Gym Income Statement For the Year Ended December 31st $ $ $ 595.817 S 1,020,8625 3.804,809 $ 595.817 750,953 3.634.631 2013 Sales Cost Of Sales Gross Profit $ $ $ 2,975.990 1,368,955 1,607,035 2014 S S S 2.575.990 1.184,955 1,391,035 Expenses Amortization General and Administrative Marketing and Sales Interest Expense Office Expense Wages and Benefits Administration Total Operating Expenses 1554905 134 500S 175.680 S 76.820 S 295.980 S 315.000 S 1,153,470 S 125.490 102.800 155,600 96.090 255,000 315,000 1.049,980 S 341,055 9,800 Operating Income Gain (losses) on marketable securities Impariment loss on Capital assets Income (loss) before taxes $ S 453.565 S 25.475 S -S 479,040 S 350,855 Provision for benefit from income s 98.239 res 134,131 S 344.909 5 Net Income 252.616 S 750953 s Opening Balance Retained Earnings Net Income 573,338 252,615 Wages and Benefits Administrations Totab ating Expenses $ 1,153.470 S 119.980 453,365 S 25.475 S 341,055 9,800 Operating Income Gain (losses) on marketable securities Impariment loss on Capital assets Income (loss) before taxes 479,040 S 350.855 98.239 Provision for benefit from) income raxes Net Income 134,131 S 344.909 S 252.616 Opening Balance Retained Earnings $ 750.953 S 573.338 Net Income 344.909 S 252,615 Disidents 75,000 S 75,000 Closing Balance-Retained Earnings $ 1,020,862 S 750,953 Exhibit II - Additional Information Regarding the Lean 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 pe required. The company will withhold any dividend payments during the foreseeable future in order to support the debt to cquity 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 Return on Equity 15.00% Return on Assets 8.00% Financial Leverage Percentage 700 Eamings per Share $4.40 Quality of Income 75.00% Profit Margin 10.00% 7 Fixed Asset Turnover 2.00 Tests of Liquidity Cash Ratio 7.00% Current Ratio 100 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 Eamed 5.40 18 Cash Coverage 6.30 19 Debt to Equity Ratio 1.35 Miscellaneous 20 Book Value Per Share 529.00 Prepare the report. It is to include, organized and presented in a logical manner: o quantitative analyses: 479020 S 350.355 Income (loss) before taxes albufaretas S 8:14 Provision for benefit from income Ares Net Income 134,131 S 344.909 S 98.239 252,616 Opening Balance Retained Earnings S 750,953 S 573,338 Net Income 344.909 S 252,615 Disidents 75,000 S 75,000 Closing Balance-Retained Earnings $ 1,020.862 S 750,953 Exhibit II - Additional Information Regarding the Lean The loan will be used to purchase Si 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 S200,000 per annum will pe required. The company will withhold any dividend payments during the foreseeable future in order to support the debt to cquity 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 Ratie Industry Ave Profitability 2014 Return on Equity 15.00% Return on Assets 8.00% Financial Leverage Percentage 7.00% Earings per Share $4.40 5 Quality of Income 75.00% Profit Margin 10.00% Fixed Asset Turnover 2.00 Tests of Liquidity Cash Ratio 7.00% Current Ratio 1.00 10 Quick Ratio 0.75 11 Receivable Turnover 13.00 Average Days in Accounts 12 Receivable 28.08 13 Payable Tumower 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 Eamed 5.40 18 Cash Coverage 6.30 19 Debt to Equity Ratio 1.35 Miscellaneous 20 Book Value Per Share S29.00 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. 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. werage Joe's Gym Background You are an Analyst for the professional service firm, 1043 LLP. Your firm specializes en 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, 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 Joe's Gym Additional Information Average Joe's caters to families and gives a substantial discount for families to work put together. Families that workout together reach their goals together. Members Foccive 2 free training sessions with enrollment so that they may start reaching their zoals 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 S1 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 Tennings, a credit analyst with TD Bank. She would like BUSI 1043 to conducta 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 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 payback the loan. Although 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 usefl 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 o provide you with this information. Additional information on the use of the loan is provided in Exhibit I." 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 to proceed 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 comparables from the bank. You have located various industry rates that can be used as a benchmark (Exhibit empression. You begin to conduct some preliminary research by requesting industry compare from the bank. You have located various industry rates that can be as a Rickstark (Exhibit III). Exhibiti: Financial Statements Average Joe's Gym Statement of Financial Position As at Dec 31 2013 2014 Assets Current S Marketable Securities Accounts Receivable Inventory Prepaid Expenses Total 235.359 $ 145,780 S 223,450 $ 425,770 S 17.300 S 1,047.859 $ 134550 457,206 174.930 355.790 19.500 1,141,976 $ Capital Property and Equipment, net TOTAL ASSETS S $ 2.756,950 3.804,809 $ $ 2,492,655 3,634,631 Liabilities and Shareholders' Equity Current Accounts Payable Accrued and Other Liabilities Current Portion of Long-Term Debt 294 3055 237 595 $ 375.900 S 907.800 $ 93.700 244.760 345,900 686 160 Long Term Debt $ 1.250,330 $ 1.601,500 Shareholders Equity Common Shares (50,000 outstanding) Retained Earning TOTAL LIABILITIES AND SHAREHOLDERS EQUITY Average Joe's Gym Income Statement For the Year Ended December 31st $ $ $ 595.817 S 1,020,8625 3.804,809 $ 595.817 750,953 3.634.631 2013 Sales Cost Of Sales Gross Profit $ $ $ 2,975.990 1,368,955 1,607,035 2014 S S S 2.575.990 1.184,955 1,391,035 Expenses Amortization General and Administrative Marketing and Sales Interest Expense Office Expense Wages and Benefits Administration Total Operating Expenses 1554905 134 500S 175.680 S 76.820 S 295.980 S 315.000 S 1,153,470 S 125.490 102.800 155,600 96.090 255,000 315,000 1.049,980 S 341,055 9,800 Operating Income Gain (losses) on marketable securities Impariment loss on Capital assets Income (loss) before taxes $ S 453.565 S 25.475 S -S 479,040 S 350,855 Provision for benefit from income s 98.239 res 134,131 S 344.909 5 Net Income 252.616 S 750953 s Opening Balance Retained Earnings Net Income 573,338 252,615 Wages and Benefits Administrations Totab ating Expenses $ 1,153.470 S 119.980 453,365 S 25.475 S 341,055 9,800 Operating Income Gain (losses) on marketable securities Impariment loss on Capital assets Income (loss) before taxes 479,040 S 350.855 98.239 Provision for benefit from) income raxes Net Income 134,131 S 344.909 S 252.616 Opening Balance Retained Earnings $ 750.953 S 573.338 Net Income 344.909 S 252,615 Disidents 75,000 S 75,000 Closing Balance-Retained Earnings $ 1,020,862 S 750,953 Exhibit II - Additional Information Regarding the Lean 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 pe required. The company will withhold any dividend payments during the foreseeable future in order to support the debt to cquity 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 Return on Equity 15.00% Return on Assets 8.00% Financial Leverage Percentage 700 Eamings per Share $4.40 Quality of Income 75.00% Profit Margin 10.00% 7 Fixed Asset Turnover 2.00 Tests of Liquidity Cash Ratio 7.00% Current Ratio 100 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 Eamed 5.40 18 Cash Coverage 6.30 19 Debt to Equity Ratio 1.35 Miscellaneous 20 Book Value Per Share 529.00 Prepare the report. It is to include, organized and presented in a logical manner: o quantitative analyses: 479020 S 350.355 Income (loss) before taxes albufaretas S 8:14 Provision for benefit from income Ares Net Income 134,131 S 344.909 S 98.239 252,616 Opening Balance Retained Earnings S 750,953 S 573,338 Net Income 344.909 S 252,615 Disidents 75,000 S 75,000 Closing Balance-Retained Earnings $ 1,020.862 S 750,953 Exhibit II - Additional Information Regarding the Lean The loan will be used to purchase Si 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 S200,000 per annum will pe required. The company will withhold any dividend payments during the foreseeable future in order to support the debt to cquity 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 Ratie Industry Ave Profitability 2014 Return on Equity 15.00% Return on Assets 8.00% Financial Leverage Percentage 7.00% Earings per Share $4.40 5 Quality of Income 75.00% Profit Margin 10.00% Fixed Asset Turnover 2.00 Tests of Liquidity Cash Ratio 7.00% Current Ratio 1.00 10 Quick Ratio 0.75 11 Receivable Turnover 13.00 Average Days in Accounts 12 Receivable 28.08 13 Payable Tumower 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 Eamed 5.40 18 Cash Coverage 6.30 19 Debt to Equity Ratio 1.35 Miscellaneous 20 Book Value Per Share S29.00 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