Reference no: EM132468731

AVERAGE JOE'S GYM Background You are an Analyst for the professionalservice firm, BUSI 1043 LLP. Your firm specializesin providing a wide variety of internal business solutionsfor 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 professionalservice 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:

INTRODUCTION TO FINANCIAL ACCOUNTING

• 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 Industry Ave Ratio on Profitability 2014 Return of Equity 15.00%

Return on Assets 8.00%

Financial Leverage Percentage 7.00%

Earnings per Share $4.40

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

Quick Ratio 0.75

Receivable Turnover 13.00

Average Days in Accounts Receivable 28.08

Payable Turnover 19.00

Average Days in Accounts Payable 19.21

Inventory Turnover 6.50

Average Days in Inventory 56.15

Solvency and Equity Position Times Interest Earned 5.4

Cash Coverage 6.30

Debt to Equity Ratio 1.35

Miscellaneous Book Value Per Share $29.00

Question 1: Prepare the report. It is to include, organized and presented in a logical manner: quantitative analyses; ratio analyses;  qualitative analyses; and appropriate recommendations given the case facts and analyses completed.