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Turnaround at Balley Total Fitness

In: Business and Management

Submitted By emmawu
Words 322
Pages 2
Turnaround at Bally Total Fitness? 1. Evaluate BFT’s business strategy, identifying the key success factors and risks.
The key success factors include: BFT offers various memberships according to members in different age and income levels; a few membership fee payment plans are available to choose; strong brand identity by nationwide using its service mark; and convenience of multiple locations.
The key risks are the competitions with commercial fitness centers, government supported physical fitness and recreational facilities, and competitors with substantial great financial resources. Another risk is the decrease of public’s enthusiasm for fitness and low cost entry to the market because of easier financing.

2. BFT’s revenue recognition policy can be highlighted as: * Revenues from initial membership fees are deferred and recognized ratably over the weighted average expected life of the memberships. Costs of origination of memberships are deferred and amortized in the same way. * Dues revenue is when monthly services are provided. When prepayment is received, the prepaid portion is deferred and recognized over the applicable term. * Unearned finance charges are amortized over the term of the contracts on the sum-of-the-months-digits method, which approximates the interest method.
All of the recognition policy sounds right in accordance with GAAP, and is consistent with the underlying economics of the business.

4. The account “Initial membership fees on financed memberships originated” is decreased by $199,979 which is the net Installment contracts receivable from Balance Sheet. Because assuming that BFT recognized membership revenues when cash was received from members, so there is no initial membership fees in installment contracts. The same reason will result into no deferred revenue and no doubtful receivables. So the amounts of

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