Answer and feedback
Running head: GOLD GYM 1
GOLD GYM 2
Gold Gym Case Study
Name
Institutional Affiliation
Date of Submission
Gold Gym Case Study
The Assignment: You have been asked to help Gold Gym prepare for their business expansion loan application. Use the Worksheets and data provided to produce the following estimates and reports:
· 2019 profit/Loss
· 2020 (first 2 quarters) profit/Loss
· Total Amount Necessary for expansion
· Estimated Timeframe for the loan repayment
· At least 6 months projected 2020 profit / loss after expansion
Gold Gym 2019 profit/Loss Statement
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Gold Gym Profit and Loss Statement / For the Year Ending 2019 |
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INCOME |
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% of Total Income |
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Membership |
$20,500 |
11.55% |
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Premium Classes |
$1,700 |
0.96% |
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Equipment Sales |
$8,776 |
4.94% |
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Merchandise Sales |
$1,659 |
0.93% |
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Hydrate Cafe |
$15,883 |
8.95% |
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Summer Swim Camp |
$129,000 |
72.67% |
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Total Income |
$177,518 |
100.00% |
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EXPENSES |
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Instructor salaries |
$80,000 |
68.6% |
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Food |
$12,091 |
10.4% |
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Utilities |
$6,003 |
5.1% |
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Office Supplies |
$2,093 |
1.8% |
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Repairs / Maintenance |
$6,300 |
5.4% |
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Equipment Purchases |
$7,400 |
6.3% |
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Internet / Marketing |
$2,703 |
2.3% |
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Total Expenses |
$116,590 |
100.0% |
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NET INCOME |
$60,928 |
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PROFIT |
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$60,928 |
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Gold Gym 2020 (First Two Quarters) Profit/Loss
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2020 Gold Gym Profit/Loss Statement for the First Two Quarters |
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INCOME |
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% of Total Income |
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Membership |
$4,813 |
29.00% |
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Premium Classes |
$863 |
5.20% |
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Equipment Sales |
$1,196 |
7.21% |
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Merchandise Sales |
$1,088 |
6.55% |
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Hydrate Cafe |
$5,268 |
31.74% |
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Summer Swim Camp |
$0 |
0.00% |
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New Classes |
$3,370 |
20.31% |
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Total Income |
$16,596 |
100.00% |
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EXPENSES |
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Instructor salaries |
$30,400 |
71.07% |
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Food |
$4,361 |
10.20% |
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Utilities |
$2,222 |
5.19% |
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Office Supplies |
$771 |
1.80% |
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Repairs / Maintenance |
$2,074 |
4.85% |
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Equipment Purchases |
$1,950 |
4.56% |
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Internet / Marketing |
$997 |
2.33% |
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Total Expenses |
$42,775 |
100.00% |
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NET INCOME |
($26,179) |
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Loss |
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($26,179) |
Total Amount of Necessary for Expansion
In this case, already the business is suffering a loss of 26,179 based on the first two Profit/loss statement of the year 2020. Therefore, the amount of loan that has to be requested should cover the loss suffered by the Gold Gym before covering the expected expansion) (expenses as well as the expansion cost). In this regard, in order to determine the amount of loan requested, we consider the projected expanses as well as the expansion cost. Based on the table below:
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Gold Gym - Estimates |
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Revenue |
Overall Startup Costs |
Production Costs per Unit |
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Prospective Product/Service |
per item |
Cost from Manufacturer |
Labor/Supplies |
Label/Packaging |
Cost from Manufacturer |
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On Demand Fitness |
$20/5 classes |
$ - |
instructor salaries |
$ - |
Instructors use equipment already in gym |
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Premium Fee |
$ 5.00 |
$ - |
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$ - |
$ - |
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Nutrition Shakes |
$ 6.00 |
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$ 1.00 |
$ 1.00 |
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Equipment |
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Dumbbells (5/10/15 lb pack) |
$ 40.00 |
$ 30.00 |
$ 5.00 |
$ 50.00 |
$ 3.00 |
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Ellipticals |
$ 600.00 |
$ 400.00 |
$ 10.00 |
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$ 5.00 |
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Treadmills |
$ 450.00 |
$ 300.00 |
$ 10.00 |
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$ 5.00 |
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Stationary Bikes |
$ 275.00 |
$ 200.00 |
$ 10.00 |
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$ 5.00 |
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Cardio Regiment |
$35/4 classes |
$ - |
instructor salaries |
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Instructors use equipment already in gym |
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Gold Gym Apparel |
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Shirts |
$ 15.00 |
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$ 20.00 |
clothing already packaged at manufacturer site |
$ 3.00 |
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Sweatbands |
$ 5.00 |
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$ 0.50 |
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Wristbands |
$ 5.00 |
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$ 0.50 |
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Socks |
$ 15.00 |
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$ 1.00 |
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Leggings |
$ 25.00 |
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$ 2.00 |
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Sweatpants |
$ 30.00 |
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$ 2.00 |
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Totals |
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$ 930.00 |
$ 45.00 |
$ 51.00 |
$ 28.00 |
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$ 1,054.00 |
Expected expanded expenses = $ 1,054
The initial total overhead amount of the Gold Gym company in 20 = $116,590
Total Expanses that is expected = $116,590 + $ 1,054= 117,644
Therefore, apart from the expenses, the organization should also have extra amount to deal with other emerging incidences that might arise. Therefore, in this case, I recommend that Gold Gym should consider requesting for the loan amount ranging from 200,000- $350,000. This is because, at least the interest rate is not too high. Moreover, this will also enable them to deal with other expenses that have not been accounted for while at the same time effectively expanding the business. Therefore, in order to just uplift their business, the business should consider taking a loan of $350,000.
Estimated Timeframe for the loan repayment
In order to gain advantage of the loan, I think Gold Gym should repay this loan within 5 years. They should not allow it to go beyond five years because thy will be required to pay higher interest rates.
However, to produce a loan amortization schedule, it is important to know the monthly payment on the loan. This loan ($350,000) should be paid within a period of 5 years and therefore, Gold Gym will be paying:
$350,000 in 5 years
Yearly repayment= 350,000/5= $70,000
Monthly repayment= $70,000/12= $5,8333.33
At least 6 months projected 2020 profit / loss after expansion
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2020 Gold Gym Profit/Loss Statement for the 6 Months |
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INCOME |
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% of Total Income |
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Other Revenue |
$ 1,471.00 |
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Membership |
$4,813 |
26.64% |
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Premium Classes |
$863 |
4.77% |
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Equipment Sales |
$1,196 |
6.62% |
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Merchandise Sales |
$1,088 |
6.02% |
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Hydrate Cafe |
$5,268 |
29.15% |
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Summer Swim Camp |
$0 |
0.00% |
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New Classes |
$3,370 |
18.65% |
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Total Income |
$ 18,067.25 |
91.86% |
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EXPENSES |
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Instructor salaries |
$30,400 |
26.70% |
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Food |
$4,361 |
3.83% |
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Utilities |
$2,222 |
1.95% |
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Office Supplies |
$771 |
0.68% |
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Repairs / Maintenance |
$2,074 |
1.82% |
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Equipment Purchases |
$1,950 |
1.71% |
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Internet / Marketing |
$997 |
0.88% |
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Loan Repayment |
$70,000 |
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Other Expenses |
$ 1,064.00 |
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Total Expenses |
$113,839 |
37.57% |
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NET INCOME |
($95,772) |
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Loss |
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($95,772) |
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References
Drake, P. P., & Fabozzi, F. J. (2012). Analysis of financial statements. John Wiley & Sons.
Pendlebury, M., Groves, R. E., & Groves, R. (2004). Company accounts: Analysis, interpretation and understanding. Cengage Learning EMEA.