Report on Establishing a New Business Plan - Assignment Point
Report on Establishing a New Business Plan
Subject: Management | Topics:

 Introduction:

A business plan is a document that is used as a base for future action of the business venture. Researchers termed business plan as a document that provides entrepreneur’s road map for successful enterprise. The person who takes risk for establishing new venture or who has the capability of taking moderate risk is an entrepreneur.

The pioneering role of entrepreneurship in changing an economy towards growth and development are well recognized in the economic literature. As a catalyst agent an entrepreneurs creates the forces of change and utilizes the same in accelerating the socioeconomic

Our vision is to provide the best quality services in reasonable price under friendly environment with the consumers. Our main business policy is to satisfy customers. Our Slogan is “you fit… World fit….”

Now a days, people very much conscious about their health. If a person’s health is fit, he will be able to do everything properly. So in order to attain a good health, people are interested to go to health club. Considering this point of view, we are going to establish a health club named “Fit Way” on January, 2008.

Today increasing demand of health club expands the market. To fulfill the customers’ demand, we want to establish our health club “Fit Way”.

Our target customers are the people, specially studying in Collages and Universities or aged from 18 to 45 years, because they can feel the importance of building for good health.

Mritunjay Biswas is the Director of our firm and Md. Nasim-Bin-Alam is the General Manager. Our business is a partnership business and we have five Partners. To bearing all the expenses to start business we need TK. 53, 00,000 as capital. Our initial investment is TK. 70, 00,000 by sharing each partner equally. In the very first year, our cash in hand is TK.7, 72,400 and bank balance is TK.34, 05,000. Out total cost is TK. 58, 13,300. it is required to complete the development of the firm. The money will be supplemented by revenue generated from service to cover the total financial requirements for the first year operation. The business will be self sustained by the end of the second year.

 ORIGIN OF THE REPORT:

This report is prepared as a part of our course requirement was told us by our “Entrepreneurship Development and Small Business” course instructor Jesmin Sultana on the very first day of our MHR-303 class.

OBJECTIVES OF THE REPORT:

Primary objective:

Our primary objective is to write this report to learn how organizations in the real, practical world develop the services of a health club to create demand for the customers.

Secondary objective:

Our respected teacher has kept a considerable percentage for this report which we feel is important for us to improve our grade and our overall perception as a student. With this report we believe we have showed how serious and obedient we are in our “Entrepreneurship Development and Small Business” course.

It is also our objective to know about the Customer Services of “Fit Way” and in future if we want to establish such type of business then we will be able to provide the best services to the customers that we are learning in this course.

SCOPE OF THE REPORT:

These are several health clubs in Bangladesh but we have focused our report on the Services of “Fitness World”. As each and every member of the “Fitness World” were extremely busy we could only get a quick look of their services and have tried our best to show their customer service in this report.

SOURCES OF DATA:

Primary source:

The primary source of information was collected through interview of Shoag Hasan, Accountant of “Fitness World”. The questions asked to him were on the basis of our health club knowledge.

Secondary source:

Debnath Chalkraborty, Instructor of “Fitness World” provided us three paged printed brief histories of “Fitness World”. He also provided us a list of Customer services. We also collected some crucial information by using internet, browsing through HEALTH CLUB website and by reading some relevant reports from the magazine published by the Health club of Bangladesh.

METHODOLOGY OF THE REPORT:

The methodology of the report includes the evaluation of the following:

When we faced problems we talked also to our “Entrepreneurship Development and Small Business” course instructor and she helped us a lot.
We talked to Debnath Chalkraborty, Head Instructor of “Fitness World”
We collected the information by using internet.
We discussed with our group members and also discussed with our senior and junior friends.

LIMITATIONS OF THE REPOIRT:

Lack of practical knowledge and experience.
Lack of the crucial information.
Shortage of time.
Some time one or two student did not participate due to personal problems

Name of the Business:

Address of the Business

House no # 16/A

Road no # 19 (Old)

Dhanmondi, Dhaka-1209

Bangladesh

Partners:

Mritunjay Biswas

Md. Nasim-bin Alam

Md. Rashedul Islam

Rafia Ahmed

Nusrat Jahan urmi

Partnership agreement:

1. Name and address of the firm:

Fit way:

House No: 16/A

Road no: 19 (Old)

Shatmosjid road,

Dhanmondi Dhaka-1209.

2. Name and address of the partners:

Mritunjay Biswas

25/10,3rd floor Munshibari Lane, Jigatola

Dhanmondi Dhaka- 1209.

Md. Nasim-bin Alam

House: 116/A,( 2nd floor)

Road: 15 (old), 8/A (new)

East Rayeer Bazar,

Dhanmondi- Dhaka 1209.

Md. Rashedul Islam

House: 9/1/A

Road: 4/A

Dhanmondi, Dhaka 1209

Rafia Ahmed

165/1 Lalbag road,

Dhaka-1211

Nusrat jahan urmi

9 No. Bhagalpur Lane

Hazaribug,

Dhaka-1205

3. Types of business:

“Fit Way” is a health club. We have a along desire to provide maximum health benefit to the people so that they can enjoy a healthy & happy life. That’s why we are going to open a health club which makes people fit.

4. Amount of investment:

Each partner contributes 14 lakh. We are 5 partners that’s why our total investment is (14*5) =70 Lakh.

5. How profit and losses will be shared:

As all parterres contribute equal amount of money, profit & losses will be shared equally.

6. How much each partner can draw out:

Each partner can draw out tk.2lakh at a time. If a partner wants to withdraw money, he/she must pay interest on withdrawals. This interest will be accumulated to our bank deposit.

7. A job description detailing duties & responsibilities of each partner:

Director:

Mritunjoy Biswas

Duties & responsibilities:

Developing new services.
Analyzing new customer needs.
Motivating employees.
Innovation new idea.
Overall planning & controlling functions of the firm.
Applying effective decision.
Sanctioning of money for different purposes.

Manager:

Md. Nasim- Bin-Alam

Duties & Responsibilities:

Supervision of firm’s activities.
Authorization of transaction vouchers.
Checking of record, maintains of circular, office files, etc.
Evaluation of employee works.
Preparing payroll.
Analyzing cash flow.
Supervise subordinate.
Manage total business.

8. A limits on the action each partner can take without consent of other:

If one partner takes any action without consent of others, it may break the partnership. So, to take any action each partner has to get the consent of other partners. A partner can’t do anything without the consent of others.

9. A method for resolving disputes: If a partner faces disputes to other partners,

All the partners of the business discuss about the matter. By discussing, we resolve. The disputes among ourselves.

10. A process for dissolving partnership:

Our firm may be dissolved on any of the following grounds.

By agreement: Our firm may be dissolved any time with the consent of all the partners of the firm. Partnership is created by contract; it can also be terminated by contract.
Compulsory dissolution: Our firm is dissolved if all of the partners or one of the partners becomes insolvent. Again, our firm is dissolved by the happening of any event which makes the business of the firm unlawful.
On the happening of certain contingencies: Our firm is dissolved by the death of a partner.
By notice: Our firm may be dissolved by any partner giving notice in writing to all other partners of our intention to dissolve the firm.
Dissolution by the court: At the suit of a partner, the court may dissolve a firm if one of the partners becomes unsound mind or permanent incapacity due to illness.
Publish advertisement in newspaper, leaflet, and billboard.

11. A process for expelling partners:

If any partner takes bribe from a person or an organization, he will be expelled from the partnership or if a partner gives any secret information to the competitors or others, he will be expelled.

 Consideration of government rules & regulation:

Any business is a subject to a number of laws and regulation under the jurisdiction of the strafe provincial governments or municipalities. In partnership business, it is our personal responsibility to understand and comply with their regulation. Government regulations have been established for the protection of:

Employees
Consumers
Competition and
The environment

 Regulations which affect our Business:

As mentioned previously each category of business will have differing regulation. The regulations which will affect our venture in our district are:

Business registration
Licensing requirements
Sales tax
Income tax
Labor legislation
Checklist of legal requirements
Good public relations

The protection of consumers is also ensured mainly by legislation from the central and ministries of consumer and commerce affairs. The laws cover employees and consumers headline of credit.

Current Financial Position:

100% equity finance.

Services:

‘Fit way will provide services which are essential for building a person’s body. It is not only beneficial for building a person’s body, but also beneficial for protecting various types of diseases. Here we will educate our members about how to exercise properly so that they can achieve maximum benefit from their fitness programs. The services which we offer are:

Trained Instructor
Suitable Environment
Cardio Vascular Training
Weight Training
Medical Consultant
Aerobics
Sauna
Appropriate price
Sufficient Training Machines
Fitness Assessment
Nutrition
Steam Bath
Massage

Description of the firm:

“Fit way” is a health club which will be established to build good health.

The firm’s business address is:

House no—16/A

Road no—19 (Old)

Dhanmondi, Dhaka-1209

The activities of our health club will be started on January, 2008. At

present, the company does not have any fulltime employee. The two

principals of the firm are:

Mritunjay Biswas, Director
Md. Nasim Bin Alam, General Manager.

We, five partners, including Mritunjay Biswas & Md. Nasim bin Alam,each

own equal share of the firm. Any questions relating to business plan is

to be directed to Md. Nasim Bin Alam.

The Market place:

The market place for ‘Fit way” are throughout Dhaka especially in

Dhanmondi,Shamoli, Mohammadpur, Zigatola, Kalabagan, Lalmatia, etc.

Because, Fit way will be established in Dhanmondi. That’s why, the

target customers for our business is in Dhanmondi or near Dhanmondi.

Market size:

Approximately, we will be able to sales tk.25, 85,700 in 2008 & tk.30,

14,500 in 2009.The market is expected to grow at an annual rate of

30% over the next five years. The following market values are based on

an average:

Selling price by Fit way: ———————–Tk.6464 per person.

Estimated size of the total Bangladeshi

Market over the next 5 years——————–652 people

Total Bangladesh market sales volume

Potential over the next 5 year——————-Tk. 42, 14,528

Customers:

The young people are conscious about their health and are interested to fit their body. That’s why our target customer is young people studying in colleges and universities. In order to fulfill our customer’s demand, we want to establish our health club ‘Fit Way’ in Dhanmondi. Because there are so many colleges and universities in Dhanmondi or near the area.

The competitors:

There are 3 competitors in Dhanmondi for our business. They are:

Fitness world
Lady line
King shook

“Fitness world” is located in Dhanmondi 2/A. It owns the largest share of the market & the amount of market share is 30%. Fitness world is our main competitor as it owns the largest market share. It provides many facilities to its customers. It charges tk.3000 per customer on yearly basic for admissions and tk. 600 for monthly payment & tk. 1500 per customer on semi-annually basis for admission & tk. 600 for monthly payment.

“Lady Line” is located in Dhanmondi 9/A. It owns the 20% share of the market. On yearly basis it charges tk. 4500 per customer for admission and tk. 700 for monthly payment. On semiannually basis it charges tk. 2500 for admission & tk. 600 for monthly payment. Lady Line is only for women. That’s why; they prefer this health club than others.

“King shook is located in Dhanmondi 32/A. It owns the 22% share of the market. It charges tk. 3500 for yearly admission and tk. 650 for monthly payment. On semi- annually basis, it charges tk. 2000 for admission tk. 700 for monthly payment.

“Fit way” is located in Dhanmondi 19(Old). It tries to own a large no.

of market share. That’s why we have collected the information of our

competitors to analyze them and set the pricing. We will charge tk.

4000 for admission & tk. 500 for monthly payment on yearly basis. On

semiannually basis, we will charge tk. 1500 for admission & tk. 800 for

monthly payment.

Developing a Marketing Plan:

Image:

Developing an image for a business is very difficult. It requires analysis and a huge amount of money. For developing the image of our business, we will do the following things:

Sales promotion:

Sales promotion is a short term incentives which increases the amount of sales. It is an effective technique for increasing sales. The sales promotions which we will give are as follows:

Discount on admission fee for the first 50 persons.
Refreshment.
10% admission for group admission (at least 2 persons)
Specials discount for ladies.
Health competition will be held and prizes will be distributed.
We will organize social activities such as:
-Blood donation

-Relief works like flood affected, winter cloth distribution.

Customer Services:

Customer is our main focus. We want to give the best quality services to our customers. By satisfying our customer, we can reach to our goal. The services which we will provide to our customers are s follows:

Free monthly medical check up.
Trained instructors such as specialists for each section like weight loss, Weight gain, body building, cholesterol control, etc.
Steam bath facility.
Reasonable price
Suitable environment is provided such as wide space, locker, A/C, well decorated fresh room, fresh drinking water facilities,etc.
Electronic machine helps customer to a great extent and customers have a great demand on this. That’s why, we will provide electronic machine.
To fulfill the customers demand, we will provide massage facilities.
Fitness assessment is given to our customers so that they will understand their development.
Entertainment like TVs, music systems, tennis court, etc, will be arranged.

Advertising:

We will publish our ad in newspaper, magazine, and leaflet.

Slogan:

A slogan effects in customers minds. A successful slogan is a strong weapon against our competitors.

Our slogan: You fit —–

The World fit —–

Visiting Cards:

“Fitway” as the health club service business; it has two visiting cards for both Directors and Managers:

Logo:

Publicity:

The impact of publicity for a business is very important. Publicity can create a large number of sales. So, we have to careful about our publicity. We will use the following media for publicity:

Newspaper:

For our business we have selected Daily Star, Prothom Alo, Janakantha etc. We will published our add on Friday, Saturday and Tuesday.

Leaflet:

We will provide our leaflet near different schools, universities, restaurants etc. in Dhanmondi.

Magazine:

We will publish add in magazines like e-biz, science world etc.

Location:

Location analysis is an important decision for any business. We have to consider cost for analyzing location. For finding location, we have considered a suitable location where customers are available for our business. The following things are given preference:

 Customer response:

For our health club, the main customers are young people. There are so many schools, colleges and universities in Dhanmondi. So customer’s response is the main issue for which we have selected Dhanmondi for our business.

Transportation:

The communication system is another important issue. Customers can come Dhanmondi through any easier transportation.

Survey:

We have conducted a survey where we have found Dhanmondi as the best location. Most customers have preferred Dhanmondi.

 Pricing:

For the new company at the introductory stage is especially challenging. We introduce a new company no one does not aware our company, so face the challenges of setting price for the first time.

For our company’s product we sets the market penetration price mean we set a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers and win a large number of share in market. We set the low initial price for three reasons.

Price is very sensitive issue to our customers. Slightly changed price can create a large impact on our business. For setting price we have considered the following issue:

We have conducted a survey and have found the price which is the most desirable to our customers. Then we have selected that price.
We have collected the information of our competitor’s price and our price is lower than the competitors.
Our selected price covers our cost.

Sales plan & credit terms:

At first we concentrate on developing our business in Dhanmondi. When we will be able to make profit, we will expand our business in another area. Any types of purchasing decisions are taken by manager. For increasing our sales we publish our ad in newspaper, magazine & leaflet. The customers will be admitted on yearly basis & semiannually basis. On yearly basis, customers have to pay lower monthly payment than semiannually basis. Any types of credit facilities will not be given to the customer.

 Sources of market information:

The market and sales data were collected by a combination of a market survey & research of published information.

The market survey was conducted primarily in Dhanmondi, Zigatola, Mohammadpur, Kalabagan & Samoli. Information was also obtained from the following publications:

The Daily Star (newspaper)
The Business Journal (magazine)

Core Management Team:

The current members of the management group are the principals of the Fit

way. Mritunjoy Biswas is the managing director of the firm. His main

responsibility is to innovate new idea which is beneficial for our business.

Md. Nasim Bin Alam is the manager of the firm whose main function is to

evaluate employee works and manage the total business.

 Job Description of Employees:

Director:

Developing new services.
Analyzing new customer needs.
Motivating employees.
Innovate a anew idea.
Overall planning & controlling functions of the firm.
Applying effective decision.
Sanctioning of money for different purposes.

Manager:

Supervision of firm’s activities.
Authorization of transaction vouchers.
Checking of record, maintains of circular, office files, etc.
Evaluation of employee works.
Preparing payroll.
Analyzing cash flow.
Supervise subordinate.
Manage total business
Publish advertisement in newspaper, leaflet, and billboard.

Accountant:

Keeping Expense/income records.
Paying the bills.
Budgeting.

Trainer:

Give direction to the customers such as how they operate machine, diet chart etc.
Make routines for each customer.

Assistant:

Help customers to do their work properly.
Clean the instrument.

Cleaner:

Clean the flat daily.

Receptionist:

Receive phone calls.
Give information to the customer.

Organization Management Organogram:

To manage our business we require the following number & types of employees.

Serial no.

Designation

No of employee

1Director1 person
2Manger1 person
3TrainerMale…     3 person

Female… 2 person

4Accountant1 person
5Doctor1 person
6Cleaner1 person
7Receptionist1 person

Information Flow

To manage our business we require the following number & types of employees.

Salary Structure:  

Serial

Designation

 

No of employee

 

Salary

    1

Director

1 person

18,000

    2

Manger

1 person

15,000

    3

Trainer

Male…     3 person

Female… 2 person

8,000X3=24,000

8,000X2=16,000

    4

Accountant

1 person

6,000

    5

Doctor

1 person

8,000

    6

Cleaner

1 person

2,000

    7

Receptionist

1 person

3,000

Information Flow:

Work policy:

Expectations from employees:

We have some expectations from our employees. The expectations are:

Skill:

We need a skilled employee to operate our business. A skilled employee has the capability to run a business smoothly.

Manner:

An employee’s manner can bring the success of a firm. If the customers are satisfied with the manner of employees, it will bring a long term profit for the firm.

Sincerity & punctuality:

The sincerity and punctuality of employees bring success for a firm. If employees are not sincere, the firm will not be developed.

Commitment & loyalty:

A committed 7 loyal employee can reach a firm to its goal. That’s why we want committed 7 loyal employees.

Expectations from employers:

Employees also have expectations from employers. For maintaining employee’s family life, they expect few confederations from their employers. The expectations are:

Salary:

Salary is the most important expectations. Because it affects the employee’s lifestyle. We will give our employees reasonable salary.

Working environment:

Employees want a good & healthy working environment. We will provide our employees a suitable environment from where they will be motivated to do their work properly.

Benefit:

Our time schedule is flexible. Our employees can utilize this opportunity. If our employees can hire customers, we will give them commission.

Risk:

Each business faces different types of risk to operate their business. We have identified some risks. If we don’t handle these risks carefully, it will affect our business. The risks are as follows:

Competitors:

Competitor is a major risk for our business. Our competitions are “Fitness World”, “King shook”, & “Lady Line”. They have captured maximum share of the industry. That’s why; we have to compete with them with a strong marketing strategy so that we can get a large number of customers.

Customer Response:

As we are a new entrepreneur of this business, customer response is lower.

Services of instrument:

To operate our business successfully, we have to use a lot of instrument daily for a long time. These instruments may out of order at any time. If any instrument is out of order, it will hamper our daily work schedule. Many of our customers will deprived of using that instrument and may become dissatisfied.

Accident of customers & trainers:

We need a large number of electronic equipment. If the customers and trainers are not careful about handling this instrument, it will create an accident.

Fire:

If our flat is burnt by fire, our instrument will be turned into ash.

 Solution:

In order to reduce risk, we can do the following things:

In order to gain a large number of customers, we will give better facilities than competitors. We will provide trained instructors to our customers. Our monthly charge is lower than the competitors. But the quality of our service is greater rather than the competitors.

By increasing promotional expenditure, we can get a large number of customers.

If we buy our instrument from a reputed company and handle these carefully, we will be able to reduce our cost.

To protect our instrument we will open an insurance policy. It will give a security which will reduce the uncertainty of our business.

Weakness:

 Our company is not well known because we are at staring level.

 Our competitors has captured larger market share.

ü Most people don’t know the importance of exercise.

43

Opportunity:

There is a scope of expansion.

 As demand increases among our customer, service might become more popular.

Threat:

Competitors are the main threat for us.

Market Share:

Company

% of market share

Fitness World

30

Kingshuk

22

Lady line

20

Fitway

28

Sales forecast:

The following sales forecast which we have made is considered to be a conservation estimate based on the responses from the companies surveyed. Additional sales can be anticipated with increased market penetration.

 Sales forecast:

The following sales forecast which we have made is considered to be a conservation estimate based on the responses from the companies surveyed. Additional sales can be anticipated with increased market penetration.

Year-1

Month

Customer no. X Monthly fee

Monthly

1

25(25X500)

12,500

2

17(25+17)X500

21,000

3

21(63X500)

31,500

4

17(80X500)

40,000

5

24(104X500)

52,000

6

21(125X500)

62,500

7

20(145X500)

72,500

8

24(169X500)

84,500

9

17(186X500)

93,000

10

18(204X500)

1,02,000

11

22(226X500)

113,000

12

24(250X500)

125,000

Total

250

=8,09,500

Yearly Admission Fee       (4000×250)

=1000000

Total

=18,09,500

47

Semiannually:

Month

Customer no. X Monthly fee

Monthly

1

9(9X800)

7200

2

12(21X800)

16,800

3

13(34X800)

27,200

4

11(45X800)

36,000

5

10(55X800)

44,000

6

15(70X800)

56,000

7

15(85-9X800)

60,800

8

11(76+11-12X800)

60,000

9

10(75+10-13X800)

57,600

10

12(72+12-11X800)

58,400

11

16(73+16-10X800)

63,200

12

16(79+16-15X800)

64,000

Total

150

=5,51,200

Semiannually Admission Fee       (1500X150)

=2,25,000

Total

=7,76,200

Five Years Sales Forecasting:

Year

Unit Sales

Average unit selling price in TK

Total sales in TK

Year-1

400

6464.25

25,85,700

Year-2

466

6464.25

30,14,500

Year-3

530

6464.25

34,25,300

Year-4

589

6464.25

38,09,000

Year-5

651

6464.25

42,10,500

 

 

 

 

 Financial requirement:

The design of the Fitway has been completely financed by the personal resources of partners. Each partners give Tk.14, 00,000. Thus we have collected Tk.70, 00,000 by which we have fulfilled our initial requirement. Our initial investment is Tk.70, 00,000 from which cash in hand is

Tk. 7, 72,400 & Bank balance is tk34, 05,000

The following is a summary of the projected first year total costs:

Description

Amount TK (Yearly)

Fixed cost

(50000X12) =600000 (including

Gas & water

Prepaid rent

1, 00,000

Instrument

17,24,000

Salaries

11,04,000

Water filtering machine

15,000

Ac

1,68,000

Fan

16,000

Light

7,500

Installation & decoration

4,00,000

Office equipment

30,000

TV(2)

30,000

Computer with sound system

35,000

Telephone, mobile

6000

Insurance

60,000(12X5000)

License

50,000

Total fixed cost

43,45,500

Variable cost
Advertisement
Leaflet

9000

 
Newspaper

12, 09,600

 
Magazine

50,000

 
Total advertisement

=12, 68600

Electricity

96,000(12X8000)

Telephone

3600(300X12)

Mobile

3600(300X12)

Refreshment (staff)

40,000

Refreshment (customer)

6000

Other expense

50,000

Total variable cost                           

14, 67,800

Total Cost

58, 13,300

  Break Even:

                                        FC

Break-even annunity   =

                                                S – VC

        43, 45,500=       6464.25-3669.543, 45,500

                                           =        2794.75

                                           =   1554.98

                                           =   1555

FC

Break-even sales       =

                                    1-VC/S

43, 45, 500

=      1-3669.5/64642543,45,500

=   1-0.568           

=       43,45,5000.432

=Tk.100, 59,027.78

             54

R=6464.25q

q

r

(q , r)

0

0

(0,0)

400

2585700

(400 , 2585700)

1555

10051908.75

(1555 , 10059027.78)

2000

12928500

(2000 , 12928500)

C=3669.5q+4345500

q

c

(q , c)

0

0

(0,0)

1555

10051572.5

(1555, 10059027.78)

2000

11684500

(2000, 11684500)

400

5813,300

(400, 5813,300)

 

 

 

Break even analysis

Break even analysis

Ratio analysis:

1. Current Ratio:

Total current assets

Formula:

                                          Total current liabilities

As we have no current liabilities, we don’t need to find out current ratio.

2. Acid Test Ratio:

Current assets-Investment-Prepaid expenses

Formula:

                                                               Current liabilities

We have no current liabilities, so we don’t need to find out acid test ratio.

3. Debt Equity Ratio:

                                            Debt

Formula:

                                            Equity

For operating our business we don’t take any debt, so we don’t need to find out debt equity ratio.

4. Operating Expanse ratio:

Total operating expense – Interest Expense

Net sales

    Formula:

Year-1

   Year-2

 

Year-3

Year-4

    Year-5

 

=1.17

=0.955

=0.567

=0.505

=0.454

Here we see day by day operating expanse ratio is lower. It indicates the signal of our success.    

5. Inventory Turnover Ratio:

Cost of goods sold

Average Inventory

Formula: 

Our business is a service business, that’s why we don’t have any cost of goods sold, so doesn’t need to find out inventory turnover ratio.

6. Average Collection Period:

Accounts receivable

X 365

Annual sales

          Formula:    

We will not give any credit facilities. So we have no accounts receivable. That’s why average collection period ratio is not required for our business.

7. Return on Total Assets:

Operating income

Total assets

 

   Formula:

Year-1

Year-2

 

Year-3

Year-4

    Year-5

 

=0.082

=0.024

=0.209

=0.211

=0.21

From the above calculation we see the return on total asset ratio is increasing.

8. Return on Equity:

    Net income

Shareholder Equity

     Formula:

    Year-1    Year-2

 

     Year-3     Year-4    Year-5

 

=0.08

=0.02

=0.21

=0.21

=0.21

From the above calculation we see, return on equity ratio is increasing unto three years & then 3 to 5 years it remains content.

   Return on Total Assets

Conclusion:

We know that health is wealth. So everyone should conscious about their health. For this reason, they should look for a good health club where they will get the required services and we promise to give them the best service which is desired.

The study confirms that the demand of health club is increasing day by day. In recent years, several changes are observed that people are concerned about the importance of good health. That’s why; the prospect of our business is promising.

Related Management Paper: