Finance: Initial Capital, Membership Projections, Cash Flow, Breakeven Analysis, Balanced Sheet

This article discusses the financial aspects of Green Fitness Studio, including initial capital requirements, membership projections, projected cash flow and profit and loss statement, breakeven analysis, and projected balanced sheet. It also includes a reference list.

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Finance
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Table of Contents
Initial Capital Requirements............................................................................................................2
Membership Projections..................................................................................................................3
Projected Cash Flow and Profit and loss Statement........................................................................4
Breakeven Analysis.........................................................................................................................7
Projected Balanced Sheet................................................................................................................8
Reference.........................................................................................................................................9

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Initial Capital Requirements
The plan of the management of Green Fitness Studio requires initial capital requirement
which includes both physical and financial capital. The main revenue for the business is through
the membership fees and other support facilities which is provided by the gym. The business will
be requiring assets such as gym equipment and office equipment. The gym equipment of the
business is estimated to cost $ 30,000 which are necessary for operating the gym (Popov &
Roosenboom, 2013). The management also has a plan to develop a website which can support
the revenue of the business. and the requirement of employees of the business. The management
of the company also needs to take trademark rights for the business in order to operate
effectively in the business.

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The management considers 3 months initial working capital requirement as the main
startup costs for the business. The working capital which will be required by the business as per
the expectations of the management are shown below in a table format:
Particulars Monthly Expense Total for 3 months
Internet & Telephone 255 765
Insurance 600 1800
Cleaning 2160 6480
Rent 6300 18900
Supplies 375 1125
Salaries & Wages 4419 13258
Utilities 891 2673
Website 21 63
Hosting 84 252
License Fees 156 156
Maintenance 1250 3750
Promotional Expenses 343 1028
Cash Fund 300000
Total Working Capital 350250
The total working capital requirement of the business is shown to be $ 350,250 for the
three months period which is considered for initial capital requirement of the business.
Membership Projections
The membership for the gym is the main source of income which can be recognized for
the business and the membership of the business is estimated to be given to members at a rate of
$ 103.8 per month. The membership projection as per the management indicates that the
members of the business will rise after the initial set up of the business. By the end of year 1, the
members of the gym are expected to be around 71 members. The management also intends to

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increase the membership fees on a yearly basis depending on the increase in demand for the
services provided.
Projected Cash Flow and Profit and loss Statement
As per the projected profit and loss statement, the management anticipates rise in the
revenue of the business as the membership of the gym is anticipated to increase on year to year
basis. As the sales revenue of the business increases, the costs of the business will also increase
and therefore the management anticipates that the business will be incurring losses during the
first two years and will be earning profits in the third year. The projected profit and loss
statement is shown below:

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Projected Income Statement:
Particulars 1 2 3
Revenue:
Membership Fees $ 55,492.22 $ 191,574.18 $ 1,167,942.03
Subscription from Fitness App $ 3,923.00 $ 13,543.00 $ 46,755.00
Total Revenue $ 59,415.22 $ 205,117.18 $ 1,214,697.03
Expenses
Internet & Telephone $ -3,060.00 $ -3,366.00 $ -3,702.60
Insurance $ -7,200.00 $ -7,920.00 $ -8,712.00
Cleaning $ -25,920.00 $ -28,512.00 $ -31,363.20
Rent $ -75,600.00 $ -83,160.00 $ -91,476.00
Supplies $ -4,500.00 $ -4,950.00 $ -5,445.00
Salaries & Wages $ -53,032.00 $ -58,335.20 $ -64,168.72
Utilities $ -10,692.00 $ -11,761.20 $ -12,937.32
Website $ -252.00 $ -277.20 $ -304.92
Hosting $ -1,008.00 $ -1,108.80 $ -1,219.68
Depreciation $ -4,586.00 $ -4,586.00 $ -4,586.00
Maintenance $ -15,000.00 $ -16,500.00 $ -18,150.00
Promotional Expenses $ -4,110.00 $ -4,000.00 $ -3,500.00
License Fees $ -624.00 $ -686.40 $ -755.04
Total Expenses $ -205,584.00 $ -225,162.80 $ -246,320.48
Profit/(Loss) before tax $ -146,168.78 $ -20,045.62 $ 968,376.55
Less: Income Tax (28%) $ 0.00 $ 0.00 $ 271,145.43
Net Profit After Tax $ -146,168.78 $ -20,045.62 $ 697,231.12
Years
The cash flow projection of the business on the other hand shows favorable cash flow
balances which means that the business anticipates positive cash flows during the three years
(Call, Chen & Tong, 2013).

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Projected Income Statement:
Particulars 1 2 3
Cash Flow from Operating Activities:
Collection of Membership Fees $ 55,492.22 $ 191,574.18 $ 1,167,942.03
Collection from Subscription $ 3,923.00 $ 13,543.00 $ 46,755.00
Internet & Telephone $ -3,060.00 $ -3,366.00 $ -3,702.60
Insurance $ -7,200.00 $ -7,920.00 $ -8,712.00
Cleaning $ -25,920.00 $ -28,512.00 $ -31,363.20
Rent $ -75,600.00 $ -83,160.00 $ -91,476.00
Supplies $ -4,500.00 $ -4,950.00 $ -5,445.00
Salaries & Wages $ -53,032.00 $ -58,335.20 $ -64,168.72
Utilities $ -10,692.00 $ -11,761.20 $ -12,937.32
Website $ -252.00 $ -277.20 $ -304.92
Hosting $ -1,008.00 $ -1,108.80 $ -1,219.68
Maintenance $ -15,000.00 $ -16,500.00 $ -18,150.00
Promotional Expenses $ -4,110.00 $ -4,000.00 $ -3,500.00
License Fees $ -624.00 $ -686.40 $ -755.04
Net Cash inflow/(Outflow) from Operating Activities $ -141,582.78 $ -15,459.62 $ 972,962.55
Cash Flow from Investing Activities:
Purchase of Assets $ -33,000.00
Website & Apps Designing $ -14,650.00
Business Set-up Expenses $ -150.00
Net Cash inflow/(Outflow) from Investing Activities $ -47,800.00
Cash Flow from Financing Activities:
Owner's Contribution $ 398,049.50
Net Cash inflow/(Outflow) from Financing Activities $ 398,049.50
Net Increase/Decrease in Cash Balance $ 208,666.72 $ -15,459.62 $ 972,962.55
Add: Opening Cash Balance $ 0.00 $ 208,666.72 $ 193,207.10
Closing Cash Balance $ 208,666.72 $ 193,207.10 $ 1,166,169.65
Years

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Breakeven Analysis
Break-Even Analysis:
Particulars 1 2 3
Average Membership per member $ 103.80 $ 114.18 $ 240.32
Variable Expenses per member per month:
Internet & Telephone $ -5.72 $ -2.01 $ -0.76
Cleaning $ -48.48 $ -16.99 $ -6.45
Supplies $ -8.42 $ -2.95 $ -1.12
Utilities $ -20.00 $ -7.01 $ -2.66
Total Variable Expenses $ -82.63 $ -28.96 $ -11.00
Contribution Margin $ 21.17 $ 85.22 $ 229.32
Fixed Expenses:
Insurance $ 7,200.00 $ 7,920.00 $ 8,712.00
Rent $ 75,600.00 $ 83,160.00 $ 91,476.00
Salaries & Wages $ 53,032.00 $ 58,335.20 $ 64,168.72
Website $ 252.00 $ 277.20 $ 304.92
Hosting $ 1,008.00 $ 1,108.80 $ 1,219.68
Depreciation $ 4,586.00 $ 4,586.00 $ 4,586.00
Maintenance $ 15,000.00 $ 16,500.00 $ 18,150.00
Promotional Expenses $ 4,110.00 $ 4,000.00 $ 3,500.00
License Fees $ 624.00 $ 686.40 $ 755.04
Total Fixed Expenses $ 161,412.00 $ 176,573.60 $ 192,872.36
Break-even Point in terms of Members 7623 2072 841
Break-even Point in terms of Dollars $ 791,249 $ 236,577 $ 202,122
Years
The breakeven analysis of the business is shown in the above table. The fixed expenses of
the business are anticipated to rise on year to year basis (McGee, 2015). The breakeven point
which is computed shows that breakeven members required in the first year is shown to be
maximum as business needs to meet the costs of the business at a lower revenue (Palia, 2014).
The breakeven point in both membership term and sales term of the business from year 2
onwards is anticipated to fall as the business anticipates to generate higher revenue and also
maintain effectively the costs of the business.

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Projected Balanced Sheet
PROJECTED BALANCE SHEET:
Particulars 1 2 3
Assets:
Cash Balance $ 208,666.72 $ 193,207.10 $ 1,166,169.65
Equipments $ 33,000.00 $ 33,000.00 $ 33,000.00
Accumulated Depreciation $ -4,586.00 $ -9,172.00 $ -13,758.00
Preliminary Expenses $ 150.00 $ 150.00 $ 150.00
Website & Apps Design $ 14,650.00 $ 14,650.00 $ 14,650.00
TOTAL ASSETS $ 251,880.72 $ 231,835.10 $ 1,200,211.65
Liabilities:
Income Tax Payable $ 271,145.43
TOTAL LIABILITIES $ 0.00 $ 0.00 $ 271,145.43
Equity:
Owner's Contribuition $ 398,049.50 $ 398,049.50 $ 398,049.50
Retained Earnings $ -146,168.78 $ -166,214.40 $ 531,016.71
TOTAL EQUITY $ 251,880.72 $ 231,835.10 $ 929,066.21
TOTAL LIABILITIES & EQUITY $ 251,880.72 $ 231,835.10 $ 1,200,211.65
Years
The projected balance sheet of the business is shown for a period of three years which
includes all assets and liabilities which are anticipated of the business.

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Reference
Call, A. C., Chen, S., & Tong, Y. H. (2013). Are analysts' cash flow forecasts naïve extensions
of their own earnings forecasts?. Contemporary Accounting Research, 30(2), 438-465.
McGee, J. (2015). Break‐Even Analysis. Wiley Encyclopedia of Management, 1-1.
Palia, A. P. (2014). Target profit pricing with the web-based breakeven analysis package.
In Developments in Business Simulation and Experiential Learning: Proceedings of the
Annual ABSEL conference (Vol. 35).
Popov, A., & Roosenboom, P. (2013). Venture capital and new business creation. Journal of
banking & finance, 37(12), 4695-4710.