Financial Analysis and Decision Making for Bottom Line's New Gym Proposal

The assignment is a comprehensive analysis of the financial performance and future investment opportunities for Bottom Line, a sport and recreation business. The report will be assessed based on its clarity, referencing, and overall presentation. To complete this task, students are expected to use published sources only and calculate various financial ratios, payback periods, accounting rates of return, and net present values. They will also prepare budgeted income statements, balance sheets, and cash budgets for the new gym location.

SPB2105
Finance for the Sport and Recreation Industry
The Australian College of Physical Education
Individual Assignment Guidelines
Comparative Analysis
Task 3
Weighting: 30%
Marks allowed: 35
Due: Week 12
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SPB2105
Finance for the Sport and Recreation Industry
Individual assignment guidelines
The following is a business case that you are required to analyse as per the
‘Required’ section on page 5, by answering the four parts (a, b, c and d) of
requirement 1 and compiling a Reference List as per requirement 2.
The business case data is as follows:
Bottom Line Pty Ltd has been operating as a medium sized suburban sports
gym in Hornsby, for the past 5 years. The following is an extract of their of
their Income Statement and Balance sheet for the year ended 30 June 2015.
Comparatives are also provided.
The bottom line is planning on opening up another gym in a different location
in order to expand its operations. They have a choice of 4 different locations,
which vary in capital cost and expected cash flows based on detailed market
research, however they are mutually exclusive (see table 3).
2015 2014
Revenue
Fees Received 321,591 525,543
Discount Received 1,806 481
Total Revenue 323,397 526,024
Expense
Staff Training 36,000 25,000
Advertising & Promotion 23,340 43,766
Accounting 6,375 6,375
Repairs and Maintenance 9,324 1,450
Stationery 3,900 4,300
Rent 21,240 20,500
Cleaning 12,000 13,000
Electricity 12,264 10,567
Telehone 9,396 10,453
Staff Amenities 377 1,898
Discount Allowed 95 1,296
Bank Charges 627 1,002
Interest 5,867 10,350
Bad Debts 2,856 3,500
Total Expense 143,661 153,457
NET PROFIT 179,736 372,567
The BottomLine
Income Statement
for the period ended 30 June 2015
Table 1.
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SPB2105
Finance for the Sport and Recreation Industry
The Bottom Line
Balance Sheet
as at 30 June 2015
2015 2014
Assets
Current Assets
Bank 115,957 15,765
Inventory 81,284 10,000
Accounts Receivable Control 5,475 10,654
GST Receivable 3,757 4,566
Total Current Assets 206,473 40,985
Non-Current Assets
Gym Equipment 266,959 365,832
Furniture & Fittings 242,286 352,123
Motor Vehicle 48,850 55,567
Computers 14,817 17,543
Total Non-current Assets 572,912 791,065
TOTAL ASSETS 779,384 832,050
Liabilities
Current Liabilities
Accounts Payable Control 25,426 32,984
GST Payable 2,000 1,344
Loan - L & L L 9,500 25,000
Total Current Liabilities 36,926 59,328
Non-current Liabilities
Loan - Republik Bank 120,000 330,000
Total Non-current Liabilities 120,000 330,000
Total Liabilities 156,926 389,328
Net Assets 622,458 442,722
Owners' Equity
Capital 442,722 70,155
Add: Profit 179,736 372,567
Total Owners' Equity 622,458 442,722
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SPB2105
Finance for the Sport and Recreation Industry
Table 2.
Proposal Cammera
y
Pymble Thornleig
h
Dural
Project cost 450,000 300,000 230,000 230,000
Year 1 before tax net cash
flow
120,000 95,000 30,000 90,000
Year 2 before tax net cash
flow
170,000 95,000 80,000 90,000
Year 3 before tax net cash
flow
110,000 95,000 100,000 90,000
Year 4 before tax net cash
flow
150,000 95,000 90,000 90,000
Year 5 before tax net cash
flow
60,000 95,000 80,000 90,000
Table 3.
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SPB2105
Finance for the Sport and Recreation Industry
Required:
a. Comment on the year on year performance of the Bottom
Line’s financial results. Using table 1 & 2.
b. Using a series of ratios which you feel are suitable (from any
of the following categories: liquidity, profitability, leverage
and activity), provide a detailed analysis of the business.
c. You are asked to calculate the payback period for each of the
new location proposals in table 3. Comment on your findings.
d. Calculate the accounting rate of return using the original
investment technique for all options (from table 3.) Assume
a company tax rate of 30%. Bottom Line is able to invest any
excess funds in a cash management trust at 12%, so it is not
interested in proposals yielding less than that. Comment on
your findings.
e. Calculate the net present value of each proposal using a
weighted average cost of capital of 10% (from table 3.) Rank
your investments and suggest which one Bottom Line should
invest in.
f. Suggest how the new gym should be funded in the new
location using your response from e.
g. Prepare a budgeted income statement, balance sheet and
cash budget using for 2016 using all your proposals and
suggestions above.
2. Reference List:
Includes any references you have used and cited in your
report. You must use the APA style referencing system.
(Note: the reference list is not included in the word count).
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SPB2105
Finance for the Sport and Recreation Industry
1. The ‘Individual Assignment Marking Guide’ on pages 7 and 8
below. It is imperative you follow this marking guide in order to
have the opportunity to optimise the marks you may receive for
this assignment. The marking guide shows what the marker will
be looking for and what mark you will get if you reach certain
levels of attainment. Print off a copy and use this to help you in
your preparation.
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SPB2105
Finance for the Sport and Recreation Industry
Submission information
This assessment task is to be submitted at the beginning of
Week 8 (i.e. week commencing……….). A submission of no
less than 1,500 words and no more than 1,750 words is
expected (excluding the reference list).
It must be word processed in either Times New Roman or
Arial font, 12 pitch and 1.5 spaced with a footer including
your name, student ID and page number. Your assignment
should be firmly stapled in the top left-hand corner. The
assignment may also be submitted via a submission link made
available with your lecturer or emailed to the lecturer if they
permit you to do so.
1. ‘Individual Assignment - Cover sheet and Declaration form’ (see
page 9), fully completed and signed;
2. ‘Individual Assignment Marking Guide’ (see pages 7 and 8). This
marking guide will show you how your mark has been
determined.
3. Your assignment with reference list.
Please note:
 ‘Turnitin’ is not required for this assignment; and
 Students are required to keep a copy of all written work
submitted.
Late submissions will be penalised as per the ACPE unit
outline, unless otherwise a written extension is granted in
individual cases by your lecturer.
a. a student who submits an assessment task after the due date for
submission will be penalised by 10% per calendar day up to 10
days, ie marks equal to 10% of the assignment's worth will be
deducted as a 'flat rate' from the mark awarded for each calendar
day the assignment is late up to 10 calendar days. Saturday and
Sunday each count as one calendar day; and
b. the assessment will not be accepted after the marked assessment
task has been returned to students who submitted the assessment
task by the due date.”
7

SPB2105
Finance for the Sport and Recreation Industry
Any student submitting late will need to contact the Unit
Lecturer at [e-mail] and make arrangements
for submission. Late assignments may not be given to other
staff or left in pigeonholes as this will further delay submission
and they may even get lost!
Frequently Asked Questions
What is being asked for? Are we on the right track?
Making sure you understand what is being asked for is the
first step! A good answer to a question that has not been
asked is actually a bad answer!
Who sort of language does this assignment require?
Specialised terms, or “jargon”, should be defined but
everyday terms should not. Do not assume that your reader
is an expert in the area being discussed, nor assume that
they are entirely uneducated.
How many references do we need?
The reference list should contain only those resources that
have actually been referred to (or “cited”) in the
assignment itself. The quantity of references is not as
important as the quality of your references; the relevance
of your references and how the references are used in your
assignment.
Can we ask people we know and use their views and
include it in the assignment?
No. Use published sources only.
Will our lecturer read our drafts before we submit?
No. We will give guidance but will not actually read (or
proof-read) any reports in advance.
Who should I ask if I have more questions?
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SPB2105
Finance for the Sport and Recreation Industry
You should ask your tutor as there may be other students
who have the same questions and there is a need for
consistency in advice.
How does the assignment contribute to my assessment
mark?
This assignment is worth 30% of your total marks in the
unit. You will be given a mark out of 35
INDIVIDUAL ASSIGNMENT MARKING GUIDE (next
page)
CRITERIA Fail Pass Credit Distinction/High
Distinction
Addresses the requirements of the question:
Variance
analysis:
a. Comment on
the year on year
performance of
the Bottom
Line’s financial
results. Using
table 1 & 2
Makes a relevant
comment on one
of the three major
aspects of Bottom
Line
Makes a relevant
comment on each
of two of the three
major aspects of
Bottom Line
Makes a relevant
comment on each of
the three aspects of
Bottom Line report
 1 mk  2 mks  3 mks
Ratios
b. Using a series
of ratios which
you feel are
suitable (from
any of the
following
categories:
liquidity,
profitability,
leverage and
activity), provide
a detailed
analysis of the
business.
States only 2
relevant ratios
without any
meaningful
commentary
States only 2 -3
relevant ratios
with meaningful
commentary for
each
States only 4-5
relevant ratios with
meaningful
commentary for each
States 6 or more
relevant ratios with
meaningful
commentary for each
 1 mks  2 mks  4 mks  6 mks
Payback Period
c. You are asked
to calculate the
payback period
for each of the
new location
proposals in
table 3.
Comment on
your findings.
Correctly
calculates the
payback period for
1 proposal.
Commentary is
not valid
Correctly
calculates the
payback period for
2 proposals.
Commentary is
correct based on
the two correct
results.
Correctly calculates
the payback period
for 3 proposals.
Commentary is
correct based on the
three correct results.
Correctly calculates
the payback period
for 4 proposals and
suggests one option
based on the correct
results.
 1 mk  2 mks  3 mks  4 mks
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SPB2105
Finance for the Sport and Recreation Industry
ARR
d. Calculate the
accounting rate
of return using
the original
investment
technique for all
options (from
table 3.) Assume
a company tax
rate of 30%.
Bottom Line is
able to invest any
excess funds in a
cash
management
trust at 12%, so
it is not
interested in
proposals
yielding less than
that. Comment
on your findings.
Does not calculate
the correct ARR
on all investments.
Calculates the
correct ARR on all
investments but
doesn’t use the
after tax profit.
Calculates the
correct ARR on all
investments and uses
after tax profit but
disregards the
opportunity cost.
Calculates the correct
ARR on all
investments and uses
the after tax profit
and commentary
includes the
opportunity cost
analysis.
 0 mk  1 mks  2 mks  3 mks
NPV
e. Calculate the
net present
value of each
proposal using a
weighted
average cost of
capital of 10%
(from table 3.)
Rank your
investments and
suggest which
one Bottom Line
should invest in.
Does not calculate
the correct NPV
on all investments.
Calculates the
correct NPV on 1
or more
investments but
doesn’t use apply
tax cash outflows.
Calculates the
correct NPV on 2 or
more investments
and applies the tax
cash outflows.
Calculates the correct
NPV on all 4
investments and
applies the tax cash
outflows. Provides a
thorough
recommendation with
dollar advantage over
the other projects.
 0 mk  2-4 mks  5-6 mks  7 mks
Funding
f.Suggest how
the new gym
should be
funded in the
new location
using your
response from e.
Provides a
suggestion
without valid
reasoning.
Provides a
suggestion with
valid reasoning
based on former
incorrect results.
Provides a
suggestion with valid
reasoning based on
correct results and
analysis.
 1 mk  2 mks  3 mks
Budgets
g. Prepare a
budgeted
income
statement,
balance sheet
and cash budget
for 2016 using
all your
proposals and
suggestions
above.
Prepares a all 3
budgets but
doesn’t use the
data available as a
basis. No
assumptions or
invalid
assumptions used.
Prepares a 3
budgets but only
uses some data
from the financial
results and
analysis. Limited
assumptions and
reasoning.
Prepares a 3 budgets
but only uses
substantial data from
the financial results
and analysis and
provides
assumptions and
reasoning.
Prepares a 3 budgets
but only uses
substantial data from
the financial results
and analysis and
provides assumptions
and reasoning.
 0-1 mk  2 mks  3 mks  4 mks
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SPB2105
Finance for the Sport and Recreation Industry
Presents with clarity:
CRITERIA Fail Pass Credit Distinction/High
Distinction
References and
paraphrases
using the APA
style.
In-text citation
and/or
paraphrasing
and/or reference
list missing or
substantially
incomplete
In-text citation
and/or
paraphrasing
and/or reference
list have a number
of errors
Satisfactory in-text
citation,
paraphrasing and
reference list,
possibly with a few
minor errors
Excellent in-text
citation,
paraphrasing and
reference list
 0mks  1mk  1.5mks  2mks
Uses clear prose
style: sentence
structure,
grammar,
spelling, etc
Writing style is
difficult to follow
and/or contains
many grammatical
and/or spelling
errors
Writing style is
unclear at times.
Contains a
number of
grammatical
and/or spelling
errors
Writing style is
coherent, with
possibly a few
grammatical and/or
spelling errors
Writing is clear and
error-free
 0 mk  1 mks  2 mks  3 mks
Not appropriate
length/not
within the word
limit
Outside the word
limit i.e. more than
1750 words OR
less than 1500
words
Length is within the
set word limit i.e.
between 1500 – 1750
words
 Minus 4mks No penalty
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SPB2105
Finance for the Sport and Recreation Industry
INDIVIDUAL ASSIGNMENT – COVER SHEET &
DECLARATION FORM
Finance for the Sport and Recreation Industry –SPBC2105
Family Name Given Name Student No.
Declaration:
I hold a copy of this assignment if the original is lost or
damaged. I hereby certify that no part of this report has
been copied from any other student’s work or from any
other source except where due acknowledgement is made.
No part of the report has been written for me by any other
person except where collaboration has been authorised by
the Unit coordinator. I am aware that this assignment may
be reproduced and submitted to plagiarism detection
software programs for the purpose of detecting possible
plagiarism (which may retain a copy on its database for
future plagiarism checking).
……………………………………………………. …../…./……
Student signature Date
For late assignments – Date/Time Received:
– Penalty Imposed (if any):
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SPB2105
Finance for the Sport and Recreation Industry
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