ENTREPRENEURSHIP – FINALS

Competencies Topics Test Type

To classify concise ideas and Planning, organizing and managing the Matching Type
concepts about planning enterprise (15)

To define financial statements and Interpreting financial statements

assess its important points;
To enumerate and classify the sets of Sound Financial Management
financial statements; Practices

To define and explain the concepts of

financial management;
To enumerate and asses the cash
management strategies that you could
applied to better guarantee that the
entrepreneur will have cash whenever
he/she needs it by DTI-BSMED
To enumerate and asses the steps in Preparing Business Reports Multiple Responses (30)
generating a business plan report
Parts of business Report
To classify on point the parts of a
business report

To classify concise ideas and Planning, Organizing and managing the True or False (15)
concepts about planning enterprise

To define financial statements and Interpreting Financial Statements

asses its important points

To enumerate and classify the sets of

financial statements

To emphasize the point of upward Preparing a Business Report

communication
Interpreting Financial Statement
To asses and analyze the given sets
of financial statement and interpret
each.

PLANNING, ORGANIZING AND MANAGING THE ENTERPRISE – 02/06/19

Business Plan – is a written document or codified text prepared by entrepreneurs.
- It contains pertinent information about the business venture.
Planning – in Layman’s words, is thinking ahead.
- In business, it is thinking about objectives, strategies, financing, production, marketing, profit prospects and
growth possibilities ahead of time.
Business Planning is WHAT TO DO, HOW TO DO, WHEN TO DO, WHAT TO EXPECT IN THE FUTURE.
- Is the process of setting up goals for a particular business endeavor and making ways to achieve these by
dividing in advance what to do, how to do it and when to do it.
- Involves the attainment of goals and the way to accomplish such goals under a given time.
Business Plan is a written document prepared by the entrepreneur, describing all the relevant information concerning the
business.
- It is an integration of functional plans, such as operations, marketing, finance, manufacture and human
resources among others. It is the guide or road map of an entrepreneur to business success.

PRINCIPLES OF PLANNING
1. Planning must be realistic – in order to succeed, any planning must be based on available resources – human, financial
and physical resources.
2. Planning must be based on Felt Needs – The objectives of the entrepreneur should fit the needs of the society which are
drawn through observations, personal interview and questionnaire.
3. Planning must be Flexible – To be effective and relevant, planning should be adjusted to changes and be responsive to
the trends in consumer tastes, preferences and wants.
4. Planning must start with a Simple Project – For an aspiring entrepreneur who has few resources in terms of capital,
materials and equipment and less skills in management and technology, a micro business has possibility of success.

STAGES OF PLANNING
1. Unplanned Stage – at the beginning of the business, the owner – manager has no time for planning and must
concentrate his time in looking for funds, customers, materials, equipment and daily operations of the business in order to
survive.
2. Budgeting – system stage – the owner – manager’s estimated income from sales and expected expenditures are made to
facilitate the orderly functions of a growing enterprise.
3. Annual Planning Stage – either a top-down or bottom-up annual plan is prepared. If the owner – manager provides the
goals to be complied by the employees, it is a top-down planning approach which is autocratic. In the case of a bottom-up
approach, employees are encouraged to participate in planning the goals and strategies of the enterprise. This is
democratic in nature.
4. Strategic Planning Stage – A long-range plan is needed as the enterprise becomes bigger. Usually a three to five-year
plan has flexibility to adjust to changing conditions.

CRITERIA OF EFFECTIVE PLANNING

1. To understand, believe, accept and support the planning, state clearly its objectives.
2. Provide measures for a satisfactory accomplishment of the objectives in terms of quantity, quality, time and cost that
would help in delegating responsibility and measuring results.
3. State the policies which will guide people in attaining the objectives.
4. Indicate what department or unit will be involved in accomplishing the objectives.
5. Indicate the time frame for each activity.
6. Specify the required resources and their corresponding costs.
7. Designate the person who is accountable for the accomplishment of the objectives.

INTERPRETING FINANCIAL STATEMENTS – 02/27/19

INTRODUCTION

Financial statements provide information about the financial position, performance and changes in financial position of an
enterprise that is useful to a wide range of users in making decisions.

Important point/s in the stated definition

• Provide information about the financial position- based on the evidences which are balance sheets, income
statements and cash flow statements; the financial manager can interpret whether the business is earning or not;
and/or in the verge of bankruptcy.
 • Performance- by the help of financial statements we can tell that if the company is earning in the previous year and
to compare to the present financial statement, the management will have the chance to create a plan that is suitable
to prevent or just continue with their processes of operation in the business.
• Changes in financial position- we mean here that whether the company is evidently performing and earning, the
management has the obligation to plan for maintaining the financial condition of the company or create a counter
plan if the company is not doing well (some will resort to cost cutting and employee lay-off)
• That is useful to a wide range of users in making decisions- When we talk about wide range of users we mean
people who are internally and externally involved in the operation of the business. (Examples: investors and
creditors)
SETS OF FINANCIAL STATEMENT

1. Income statement (profit and loss)

2. Balance sheet [ Assets = Liabilities + Owner’s Equity)
3. Statement of cash flow {Operating activities, investing activities and financing activities}
Income Statement (Profit and Loss Statement)

 It is a summary of the financial performance of a business over time (monthly, quarterly or annually is most
common).
 It reflects the past performance of the business.
 The report most often used by small business owners to track how their business is performing.
 It lists all the company’s income and then subtracts all of its expenses.
 The resulting amount left at the bottom is the profit (loss) that the company experienced.
 Significant Formula:
Profit = Revenues earned - Expenses incurred

Example of Income Statement

BLUE MOON COMPANY
Income Statement
For the year ended December 31, 2018

Income
Sales Revenue ₱41,000.00
Other income ₱12,300.00
Total Income ₱53,300.00

Expenses
Advertising ₱7,000.00
Equipment ₱4,400.00
Legal services ₱2,800.00
Office supplies ₱5,500.00
Rent ₱4,000.00
Salaries ₱11,000.00
Utilities ₱5,200.00
Total expenses ₱39,900.00

NET INCOME ₱13,400.00

Interpretation of Income Statement

 The income exceeds business expenses, the business will have effectively made a profit.
Balance Sheet

 It measures what the company owns and subtracts what it owes.

 It is a snapshot of a company’s financial condition at any particular time.
 It is also the heart of double-entry accounting. Each side equals the other.
 The central equation of a balance sheet is:
Assets = Liabilities + Owner’s Equity
A balance sheet has two (2) formats:

1. Account form balance sheet- it is just like a T-account listing of assets on the debit side and equity and liabilities on
the right hand side.
2. Report form balance sheet – lists assets followed by liabilities and equity in vertical format.
Example of Balance Sheet (Account Form)
BLUE MOON COMPANY
Balance Sheet
As of December 31, 2018

ASSETS LIABILITIES & EQUITY

Current Assets Liabilities
Cash ₱12,000.00 Accounts Payable ₱26,100.00
Inventory ₱22,500.00 Loan Payable ₱12,400.00
₱34,500.00 Total Liabilities ₱38,500.00

Non-current Assets Owner's Equity

Equipment ₱16,000.00 Paid-in Capital ₱12,000.00
Total Assets ₱50,500.00 Total Liabilities & Equity ₱50,500.00

Example of Balance Sheet

( Report Form)
BLUE MOON COMPANY
Balance Sheet
As of December 31, 2018

ASSETS
Current Assets
Cash ₱12,000.00
Inventory ₱22,500.00
₱34,500.00

Non-current Assets
Equipment ₱16,000.00
Total Assets ₱50,500.00

LIABILITIES & EQUITY

Liabilities
Accounts Payable ₱26,100.00
Loan Payable ₱12,400.00
Total Liabilities ₱38,500.00

Owner's Equity
Paid-in Capital ₱12,000.00
Total Liabilities & Equity ₱50,500.00

Cash Flow

 It refers to generating or producing cash (cash inflows) and using or consuming cash (cash outflows).
 It is the lifeblood of the business and keep that blood circulating at all times in order to avoid failure.
The (3) three areas of cash flow statement:

1. Operating activities. These constitutes the revenue-generating activities of a business.

Examples: cash received and disbursed for product sales, royalties, commissions, fines, lawsuits, supplier and lender
invoices and payroll.

2. Investing activities. These constitutes payments made to acquire long-term assets, as well as cash received from
their sale.
Examples: purchase of fixed assets and the purchase or sale of securities issued by other entities.

3. Financing activities. These constitute activities that will alter the equity or borrowings of a business.
Examples: are the sale of company shares, the repurchase of shares and dividend payments

Example of Statement of Cash Flow

 BLUE MOON COMPANY
Statement of Cash Flow (direct approach)
For the year ending December 31, 2018

Cash flows from operating activities:

Cash receipts from customers ₱45,100.00
Cash paid to suppliers -₱36,600.00
Net cash provided by operating activities ₱8,500.00

Cash flows from investing activities:

Proceeds from sale of equipment ₱29,300.00
Net cash provided by investing activities -₱20,800.00
Legal services ₱2,700.00

Cash flows from financing activities:

Cash received from issuing stock ₱6,000.00
Cash paid for dividends -₱10,000.00
Net cash provided by financing activities -₱4,000.00

Net increase in cash ₱7,200.00

Cash balance at J anuary 1, 2018 ₱11,300.00
Cash balance at December 31, 2018 ₱18,500.00

Interpretation of Statement of Cash Flow:

In this example, we used direct approach that requires to present cash flow information that is directly associated with the
items triggering cash flows.

The company is most involved with operating activities than investing activities. The company needs an improved financing
activities to settle its financial obligations whether inside or outside the company.

SOUND FINANCIAL MANAGEMENT PRACTICES – 03/06/19

Introduction

- The resources you need, in order to run your business and produce the goods or services, are men, materials,
and machine.
 - To have all these resources, you need money.
- It is important that you know how to gather, organize, coordinate and record the money or financial resources of
your business. This is called FINANCIAL MANAGEMENT.
ADOPT EFFECTIVE FINANCIAL PLANNING. Financial Planning is perhaps the most difficult task of the owner-manager.
Planning is important because the funds of the enterprise are limited and used properly for the good of the business.
OBSERVE SOUND FINANCING. Most of the time an entrepreneur does not have enough money to start or operate the
business. When this happens, the owner may decide to borrow money. In borrowing, one must be careful not to borrow too
much. (40%-borrowed money for the operation of the business, while 60% must come from ones own pocket.)
- Business that are funded by 40% debt is burdened with hanging to pay very high interests.
RECORD AND MONITOR CASH FLOW. Cash flow is the actual movement of cash within a business. The entrepreneur
needs to record the “sources-and-uses-of-fund” in order to know/how much cash is needed, and when that money is
required by a business within a period of time.
KNOW THE BUSINESS COSTS. Costing is calculating the total money spent in making and selling the product, or
completing a service to be offered, in the market. Costing helps the entrepreneur set prices, make better decisions about
business and plan for future operation of the company.
- Some examples of costs are raw materials bought to make products or complete services; salaries and wages
of factory workers or service crew; and electricity for the machines, light & office equipment.
REDUCE COSTS. It will make the business more profitable when the costs are minimized.
- Some ways to reduce costs can be by recycling (e. g. papers, containers); using energy-saving device or
materials (e.g. energy-saving lamps, rice hulls, electric fans); buying second-hand equipment or renting instead
of buying; and asking family members, like children and spouse, to help in the business.
RECORD ALL BUSINESS TRANSACTIONS. Anything that are owned by the owner and used for business, proceeds
(sales) from selling the products or services, and at the same time the expenses incurred in operating the business, should
be written down. This will give the entrepreneur a fairly accurate picture of how the business is doing. (Handle well the
bookkeeping and accounting system, record-keeping, tax payments, collecting of money, insurance, budgeting, and
managing of risks). This will keep the business financially stable and enable it to stay in operation for a long time. There is
nothing like knowing how to keep track of your business, how is doing and if it is going as planned.
PREPARE INCOME STATEMENTS. The income statements will show whether the business made a profit or suffered a
loss for a given period. Generally, the entrepreneur should know if the revenues are greater than expenses for a given
month, quarter or year.
SEEK THE SERVICES OF A GOOD ACCOUNTANT. If the entrepreneur is not an accounting graduate or does not have
any background in accounting, it is best to avail of the services of a good accountant to set up the firm’s books of accounts
and to initiate him/her into recording process. Once the entrepreneur gets used to it, recording will almost be mechanical
and routine. Doing it regularly will be very helpful in many instances, like payment of taxes, meeting cash requirements,
payment of debts in time and business expansion in the future.
MANAGE ENTERPRISE FUNDS PROPERLY. Managing funds is not simply maintaining sufficient cash for the business
operations, but entails a more comprehensive approach than just having ready cash. Part of this is knowing the possible
sources of funds, like friends, family members, banks and other lending institutions. It is also important to budget the cash
properly and that there is an internal control, so that cash is available whenever it is needed.
The DTI-BSMED has also enumerated the following cash management strategies that you could be applied to better
guarantees that the entrepreneur will have cash whenever he/she needs it.
Barter
-If paying cash can be avoided, consider barter.
-In common Filipino business language, this is often called “EXDEAL” or exchange deal or “trade-in”. This is a usual
practice in trading, which sometimes involves exchange of goods, even between competitors.
-mobile phone retailers and tire supply merchants exchange items in their stocks with those not fund in their inventory, but
are nonetheless available from their neighboring competitors, either with little or no cash involved.
Once a week Disbursement
- As much as possible, allow disbursements only once a week for easy monitoring of the inflow and outflow
Disallowance of Prepayment
- Simply put, do not make payments even before the obligations become due.
- It is a different picture, though, if paying beforehand will save the entrepreneur more money.
Taking Advantage of Non-interest Bearing Payables
- Postpone payment by all means.
- You can use the money for income-generating activities like adding to the business working capital.
Some Tricks with Regard to issuing a Check
- If the entrepreneurs’ creditor will allow it, issue a post-dated check to pay one’s debt. In banking, there is such a
practice called “playing the float” or funding the checking account only at the moment of check encashment
between or among different banks.
- Take-advantage of the period between the time a check is issued and the moment the creditor will cash it.
- The entrepreneur can also mail the check to buy even more time. Be wary, though, of the law penalizing
issuance of bouncing checks.
- Just be sure that the company has sufficient funds in the bank at the moment of encashment.
Concentration banking
- If the entrepreneur maintains different accounts at different banks, it is suggested that he/she also maintain a
“main” bank account, where all deposits are transferred to facilitate bank reconciliation
“Lock Box System”
- Sometimes the distance of the entrepreneurs’ debtors prevents them from paying. A good way to resolve this is
to rent a post office box (P.O. Box)
- Cluster your debtors into one area and select a central post office closest to them.
- Rent a P.O. Box maintained by that post office and notifies the debtors that they can also send their payments
to that P.O. box.
- An alternative to this is opening an account at a bank branch nearest to the debtors. The payments made by
these customers to that account will be remitted by the bank to the branch where you maintain your account.
Requirement of Down Payment
- Finally, require your customer to make a down payment if paying in full is not possible.
Something to Ponder
- In business, keeping accounts of transactions implies excellent record-keeping”
- “A business can be profitable for a long time, but its can also incur losses anytime”
- “It pays to exercise prudence when handling one’s finances.”

BUSINESS REPORT – 03/04/19

Introduction
- Business Reporting on a regular basis such as monthly, quarterly, semi-annually or yearly is a must for those
who owns/manages the business.
 - Business report also serve the purpose of showing what the business has achieved compared to what was
planned for a particular period, normally on an annual basis.
- Business report can be used for securing additional capital by attracting new investor or for loans purposes in
the bank as well as adds to the good reputation of the company.

According to Thompson (2005), in generating a business report, the following steps should be considered:
1. Determine the scope (purpose) of the report;
2. Consider the target audience (readers);
3. Gather and organize the supporting information (research);
4. Analyze and weigh the supporting information;
5. Determine the solutions, findings and/or recommendation; and
6. Determine the report format.

Upward Communication
Upward
Manager – Production

Assistant Production Manager

Production Supervisor

Worker

Important Points to Remember

- Thompson (2015) further said that before actually writing, organize the information into an outline form, and
formulate an outline for the report by choosing the major supporting ideas, developing the details and
eliminating the unnecessary issues that were gathered.
- A report could be represented as a memo report, a standardized form report, or a formal report.
- The report must be accurate and objective.

The business report format can be as follows:

1. Executive Summary
2. Purpose and Rationale
3. Context which includes the vision-mission statement, strategies, organizational structure and staffing.
4. Actual performance versus plans/targets with the corresponding remarks at why it happened that way.
5. Facilitating and hindering factors in the achievement of plans.
6. Issues and concerns that were addressed.
7. Financial statements with its corresponding summaries & interpretation.
8. Conclusion & recommendations.