Corporate Finance Homework, Statistics Problem Example

Research has shown that the consumer demand for exercise and physical maintenance centers will continue to be robust. The physical fitness and exercise segment of the economy generates $26,000,000,000 a year in revenues, 573,328 employment positions and 29, 501 business opportunities (IBISWorld, 2013).  The Department of Labor Statistics sates that the physical training sector is one of the segments of the economy that is anticipated to experience sustained growth during the next decade. The increase in employment opportunity for physical trainers can be attributed to the aging population in the United States and other industrialized nations. The generations which were born subsequent to the baby boom are becoming increasingly concerned with regards to maintaining their physical health.  The members of the digital generation are becoming increasingly concerned about the maintenance of good health. This concern can be attributed to the sedentary aspect of internet use (IBISWorld, 2013).

Research has demonstrated that there is a significant relationship between deteriorating health and obesity. The deteriorations in public health are manifested in elevated indexes of diabetes, heart disease and tumors (IBISWorld, 2013). Physical fitness enables many of the individuals who participate to attain lower indexes of disease.  Consequently, the demand for high quality physical fitness facilities is anticipated to increase significantly (IBISWorld, 2013). Investing in the physical fitness business is a good investment.

The present health trend is directed toward preventative health care. It has been said that a small amount of prevention is worth its equivalent in a large amount of remedy. The physical fitness members are aware of this aspect. This is why memberships in the physical fitness maintenance facilities are at an all-time high.  As many of the employment occupations in the economy have been experiencing decreased demand, physical fitness has been experiencing an increased demand for services.

Assumptions

The consumer interest in physical fitness centers will remain robust throughout the decade (IBISWorld, 2013).  Investments which are made in the physical fitness facilities are anticipated to experience high returns due to the increasing population use of the physical fitness centers. Consequently, it can be assumed that the access to the capital investment of $515,000 which has been made in the physical fitness center will remain accessible. The investors have been experiencing high return on equity.  As the need for the services in the physical fitness centers increase, it can be anticipated that the demand will facilitate the collection of accounts receivables.

This can be attributed to the premise that many of the members subscribe to multi monthly plans, in order to accommodate the recommendations of the physical fitness instructors and trainers. This is a trend which has been demonstrated as increasing since the physical fitness clubs inception in 2009 (Financial Services II, 2010). This is a trend which is anticipated to continue and increase throughout the next decade. The growth in membership has been estimated at six percent annually and is expected to increase. The perspective of the physical health care business are in aligned with the USDA’s Plan for healthier America by increasing the nutritional content and decreasing the cholesterol content of many foods (IBISWorld, 2013). As a result, Physical fitness is a good investment which is anticipated to demonstrate excellent return on equity for the investors.

Any investment in expanding the faculty or acquiring new equipment has been proven to be fruitful. The returns on equity have been proven to be consistent over the past few years (IBISWorld, 2013).

The gross sales which were demonstrated are the result of the sale of monthly memberships. . The rate for the monthly membership is $16.87. There are approximately averages of 10,000 monthly memberships which are sold each month. There are some refunds and partial refunds which are attributed to the aspect that the fitness machines may be unavailable or out of order. The expenses include the officers’ compensation, salaries and wages for the personnel payroll, taxes, employee benefits, professional services (i.e. attorney), rent, utilities telephone, marketing expense, supplies, interest, administrative expenses depreciation and amortization. These are operating costs which are incurr3ed by the business in order to produce the products and services which generate income. The expenses total to $113,040 each month.

Pro Forma Income Statement 2014 (Q1, Q2)

References

Financial Services II (2010). Boom tine for budget exercise? Mintel.

IBISWorld (2013). Gym, health and fitness clubs in the U.S.: Market research report. IBISWorld, NAICS 71394.

IBISWorld (2013). Weight loss camps in the U.S. Market research report, IBISWorld, OD  320.

IBISWorld (2013). Sports coaching in the U.S.: market research report. IBIS World, NAICS  61162.