Module 5 Entrepreneurship (PDF)

ENTREPRENEURS HIP PRESENTS MODULE 5 WEEK 6 1ST QUARTER  LET’S RECALL IDENTIFY THE FOLLOWING PICTURES WHICH BUSINESS SUITES FOR URBAN OR RURAL AREAS.  ACTIVITY TIME DIRECTIONS: SOLVE THE PROBLEM. EVERY DAY URSULA SOLD 4 BOXES OF TEA. THE COST OF E...

ENTREPRENEURS HIP PRESENTS MODULE 5 WEEK 6 1ST QUARTER  LET’S RECALL IDENTIFY THE FOLLOWING PICTURES WHICH BUSINESS SUITES FOR URBAN OR RURAL AREAS.  ACTIVITY TIME DIRECTIONS: SOLVE THE PROBLEM. EVERY DAY URSULA SOLD 4 BOXES OF TEA. THE COST OF EACH BOX OF TEA IS 56.87. EVERY BOX CONTAINS OF 10 PACKS. QUESTIONS. 1. HOW MUCH IS COST OF EVERY PACK OF TEA? ANSWER: 5.687 OR 5.69 2. SOLVE THE TOTAL INCOME OF URSULA IN 2 WEEKS AND 3 DAYS. INCOME PER DAY: 227.48 FINAL ANSWER: 3,867.16  TOPIC: Screen the Proposed Solution/s based on Viability, Profitability and Customer LEARNING COMPETENCIES: Requirements Screen the proposed solution/s based on viability, profitability, and customer requirements; CS_EP11/12ENTREP-0b-c-5 OBJECTIVE/S o Leaner will be able to screen proposed solution based on viability, profitability and customer requirements.  INTRODUCTION An entrepreneur is affected by his personal aspects, abilities and skills. In screening opportunities, the entrepreneur first has to consider his or her preferences and capabilities by asking three basic questions: 1. Do I have the drive to pursue this business opportunity to the end? 2. Will I spend all my time, effort, and money to make the business opportunity work? 3. Will I sacrifice my existing lifestyle, endure emotional hardship, and forego my usual comforts to succeed in this business opportunity? Entrepreneurship  ENERGIZER LET’S PLAY PAPER DANCE  What is Viability? o According to Oxford Dictionary it is the ability to work successfully. o The ability as intended or to succeed; the degree of chance that something will succeed” (Cambridge University Press 2020 RISK LOW RISK MEDIUM RISK HIGH RISK RERTURN HIGH RETURN BEST GOOD FAIR MEDIUM RETURN GOOD FAIR BAD LOW RETURN FAIR BAD WORST MORATO 2016 ENERGIZER LET’S PLAY BALANCE SHEET  BAD DEBTS BILLBOOK VOUCHER SINGLE ENTRY  NET PROFIT  BILL OF EXCHANGE CAPITAL  What is Profitability? o According to Oxford Dictionary the degree to which a business or activity yields profit or financial gain. o The state or condition of yielding a financial profit or gain. It is often measured by price to earnings ratio”. (Web Finance Inc. 2020)  According to Ramos' blog, viability, profitability and customer’s requirements are very important to the success of the entrepreneur “These days, the customer is king. They are much more informed, much more assertive, much more discerning, and their tastes and demands change like the seasons. Entrepreneurship 4 Financial Statements in Screening for Profitability (1)Income statement; (2)Statement in changes in owners equity (3)balance sheet (4)cash flow statement Entrepreneurship  Income Statement According to lendingtree.com. An income statement shows business revenue minus expenses and losses. Your income statement, also called the “profit and loss” statement, goes hand in hand with your cash-flow statement and balance sheet to create a complete snapshot of your business’s financial performance. The purpose of an income statement is to summarize revenue, gains, expenses, and losses on a monthly, quarterly, or yearly basis. The income statement shows the resulting net income your business earned during that period of time.  Statement SINGLE-STEP INCOME STATEMENT: THIS METHOD IS POPULAR AMONG SOLE PROPRIETORS AND SMALL OPERATIONS WITH A SINGLE LINE OF BUSINESS. NET INCOME = (REVENUES + GAINS) – (EXPENSES + LOSSES) INCOME STATEMENT OF GEORGE'S CATERING FOR THE PERIOD ENDING 31ST OF MAY 2010 $ & INCOME 15,500 SERVICE RENDERED (10,500 + 5,000) 15,500 EXPENSES -4,200 SALARIES 4,000 TELEPHONE EXPENSE 200 NET PROFIT 11,300  Multistep income statement: This type of statement is common for companies with multiple lines of business or those that sell tangible goods. The multistep process separates operating revenue and expenses from non-operating revenue and expenses. You would use three formulas throughout the income statement: Step 1: Gross profit = net sales – cost of goods sold Step 2: Operating income = gross profit – operating expenses Step 3: Net income = operating income + non-operating income  COMPONENTS OF INCOME STATEMENTS REVENUE - this refers to the amount that the company accumulated during its operation, either from selling of goods or rendering of services. COST OF GOODS SOLD - these expenses refers to the direct cost incurred in the creation of the products. OPERATING EXPENSES – this refers to the cost incurred by the business in their operation. SELLING EXPENSES - refers to the amount incurred by the business in selling their products. ADMINISTRATIVE EXPENSES - refers to the amount incurred by the Company in the operation of the business aside from generating revenues. GROSS PROFIT - refers to the excess of revenue after the cost of goods sold was deducted NET INCOME - Refers to the excess in Gross profit after operating expenses were deducted NeET LOSS - it occurs when revenue generated is lower that the expenses incurred.  Statement in changes in owners equity According to STATEMENT OF CHANGES IN EQUITY FOR GEORGE'S CATHERING https://corporatefinanceinstitute.com/ FOR THE PERIOD ENDING 31ST OF MAY 2010 owners equity is the proportion of the total value of a company’s assets that $ can be claimed by the owners and shareholders Owner’s Equity is defined as BALANCE AT THE BEGINNING OF THE PERIOD the proportion of the total value of a company’s assets that can be claimed by CAPITAL CONTRIBUTED DURING THE PERIOD 15,000 its owners (sole proprietorship or partnership) and by its shareholders (if it is a corporation). It is calculated by PROFIT FOR THE PERIOD 11,300 deducting all liabilities from the total DRAWINGS -500 value of an asset (Equity = Assets – Liabilities) BALANCE AT THE END OF THE PERIOD 25,800 COMPONENTS OF CHANGES IN OWNER’S EQUITY 🞅INITIAL INVESTMENT - This refers to the start-up capital of the owner/s. 🞅ADDITIONAL INVESTMENT - During the course of operation, the owner invested additional capital for the business 🞅WITHDRAWAL - this refers to any assets owned by the company that the owner used for personal gains.  COMPONENTS OF BALANCE SHEET Assets - Owned property by a person or company and examples are all the investments in the enterprise like cash, account receivables, inventories, land building and equipment Liabilities - Responsibilities and obligations of a person or company like bank debts, accounts payable lending investors including debt to suppliers if the enterprise a merchandising business. The balance sheet accounting equation is described below. Equity is also called capital or the amount invested by the entrepreneur to start his  BALANCE SHEET FOR GEORGE'S CATERING Balance Sheet ON THE 31ST OF MAY 2010 $ $ ASSETS: NON-CURRENT ASSETS: 12,000 BAKING EQUIPMENT 12,000 According to wikihow.com a balance sheet is a statement of a business's assets, CURRENT ASSETS: 14,800 liabilities, and owner's equity as of any BANK AND CASH 14,800 given date. Typically, a balance sheet is prepared at the end of set periods (e.g., every TOTAL ASSETS 26,800 quarter; annually). A balance sheet is comprised of two columns. The column on the left lists the EQUITY AND LIABILITIES 25,800 assets of the company. OWNER'S EQUITY 25,800 CAPITAL A balance sheet gives you a snapshot of your company's financial position at a NON- CURRENT LIABILITIES 1,000 given point in time. Along with an income LOAN 1,000 statement and a cash flow statement, a balance sheet can help business owners evaluate TOTAL EQUITY AND LIABILITIES 26,800 their company's financial standing.  Cash Flow CASH FLOW STEMENT FOR GEORGE'S CATERING Statement FOR THE YEAR ENDED 31ST OF MAY 2010 CASH FLOW FROM OPERATING ACVITIVITES $ CASH RECEIPTS FROM CUSTOMERS (10,500 + 5,000) 15,500 CASH PAID TO SUPPLIERS AND EMPLOYEES (4,000 + 200) -4,200 CASH GENERATED FROM OPERATIONS 11,300 NET CASH FLOW FROM OPERATING ACTIVITIES 11,300 According to Investopedia cash flow statement is a financial statement that provides aggregate data CASH FLOW FROM INVESTMENT ACTIVITIES regarding all cash inflows a company receives from its ongoing operations and external investment ADDITIONAL TO EQUIPMENT -12,000 sources. NET CASH FROM INVESTING ACTIVITIES -12,000 The goal of the cash flow statement is to provide an accurate picture of the cash inflows, outflows, CASH FLOW FROM FINANCING ACTIVITIES and net changes of cash during the accounting period. The statement is prepared by calculating net changes to PROCEEDS FROM CAPITAL CONTRIBUTED 15,000 DRAWINGS -500 cash from operating, investing, and financing activities. PROCEEDS FROM LOAN 5,000 The total increase or decrease in cash for the current year is added to the ending cash from the prior year to PAYMENT OF LOAN -4,000 NET CASH FLOW FROM FINANCING ACTIVITIES 15,500 calculate the ending cash and cash equivalents for the current year. Keep in mind that the ending cash amount NET INCREASE/DECREASE IN CASH 14,800 on the statement of cash flows should be equal to the CASH AT THE BEGINNING OF THE PERIOD ending cash amount on the balance sheet. If the CASH AT THE END OF THE PERIOD 14,800 amounts are not equal, then there has been COMPONENTS OF STATEMENT OF CASH FLOWS 🞅 OPERATING ACTIVITIES- refers to the actual operation of the business 🞅 INVESTING ACTIVITIES- Refers to the purchases of Fixed assets 🞅 FINANCING ACTIVITIES- refers to the sources of funds to finance the investing activities.  After having an overview on different financial statement, entrepreneurs should include the know-how on financial ratio as taken from the textbook author Morato(Morato 2016) for the formula on payback period, cash payback period, return on sales, return on assets and return on investment and applying the data from “Gerry’s Vulcanizing” (Celender 2020) can be computed as follows Entrepreneurship  TOTAL INVESTMENT PAYBACK PERIOD = -------------------------------------------------- ANNUAL NET INCOME (AFTER TAXES) $25,800 PAYBACK PERIOD = STATEMENT OF CHANGES IN EQUITY FOR GEORGE'S CATHERING ------------------------ FOR THE PERIOD ENDING 31ST OF MAY 2010 $22,600 PAYBACK PERIOD = 1.14 $ INCOME STATEMENT OF GEORGE'S CATERING BALANCE AT THE BEGINNING OF THE PERIOD FOR THE PERIOD ENDING 31ST OF MAY 2010 $ & CAPITAL CONTRIBUTED DURING THE PERIOD 15,000 INCOME 15,500 SERVICE RENDERED (10,500 + 5,000) 15,500 PROFIT FOR THE PERIOD 11,300 EXPENSES -4,200 DRAWINGS -500 SALARIES 4,000 TELEPHONE EXPENSE 200 NET PROFIT 11,300 BALANCE AT THE END OF THE PERIOD 25,800  There is also the return sales (ROS) ratio where the entrepreneur calculates how much profits the enterprise is earning for each peso sold. NET PROFIT (AFTER SALES) RETURN ON SALES = -------------------------------------------------- SALES/INCOME 22, 600 INCOME STATEMENT OF GEORGE'S CATERING RETURN ON SALES = FOR THE PERIOD ENDING 31ST OF MAY 2010 -------------- 31, 000 INCOME $ & 15,500 RETURN ON SALES =.71 or SERVICE RENDERED (10,500 + 5,000) 15,500 71% EXPENSES -4,200 SALARIES 4,000 TELEPHONE EXPENSE 200 Entrepreneurship NET PROFIT 11,300  NET PROFIT AFTER TAXES RETURN OF INVESTMENT = -------------------------------------------------- TOTAL ASSETS / INVESTEMENT 22,600 BALANCE SHEET FOR GEORGE'S CATERING ON THE 31ST OF MAY 2010 $ $ RETURN OF INVESTMENT = ASSETS: ------------- NON-CURRENT ASSETS: 12,000 26,800 BAKING EQUIPMENT 12,000 RETURN OF INVESTMENT =.84 or 84% CURRENT ASSETS: 14,800 INCOME STATEMENT OF GEORGE'S CATERING BANK AND CASH 14,800 FOR THE PERIOD ENDING 31ST OF MAY 2010 TOTAL ASSETS 26,800 $ & INCOME 15,500 EQUITY AND LIABILITIES 25,800 SERVICE RENDERED (10,500 + 5,000) 15,500 OWNER'S EQUITY 25,800 CAPITAL EXPENSES -4,200 SALARIES 4,000 NON- CURRENT LIABILITIES 1,000 TELEPHONE EXPENSE 200 LOAN 1,000 TOTAL EQUITY AND NET PROFIT 11,300 LIABILITIES 26,800  What is Consumer Requirements? Consumer preferences refer to the taste of particular groups of people. Examples: -clothes people wear -the food they eat -the music they listen to -the movies they watch” This is true for millennials because they are inclined with the technology; they usually are the first in the house to patronize online shopping, movies and other trends. Entrepreneurship  FACTORS AFFECTING CONSUMER BUYING BEHAVIOR The consumer’s buying behavior is affected by three factors: (1)Psychological variables - consisting of motivation, perception, learning, attitudes and lifestyle. (2)Social influences - personal influence, reference groups, the family, social class and culture. (3)Purchase situation - purchase task, The social surroundings , the physical surroundings , temporal effects and antecedent states. Entrepreneurship  Conclusion o In searching for business entrepreneurs should take consideration the preferences and capabilities. o Entrepreneur should have a strong will to succeed. o In screening for profitability of business and entrepreneur should be knowledgeable with the four financial statements, (1) Income statement; (2) Statement in changes in owners equity (3)balance sheet and (4) cash flow statement. o The consumer’s buying behavior is affected by three factors: Psychological variables , Social influences and Purchase situation Entrepreneurship