CAPSULE OF YESTERDAY’S ACTIVITIES

 Curriculum Guide of subject Entrepreneurship

 Discussion of “Should you be your own Boss” -focus on the
reasons to start up a business
 Define what is entrepreneurship and activities involved
 Socio-Economic benefits of entrepreneurship
 Define who is an entrepreneur
 Perks and risk of being an entrepreneur
 Roles of an entrepreneur
 Explore Ideas and Opportunities (through your activity)
 Sources of business ideas
 How we are going to assess business opportunities
 Business Philosophy
 4 Functions of the business (Production, Management,
Marketing and Finance)
DEVELOPING A BUSINESS PLAN
Why Business Plan is important
Parts of the business plan
What goes into a Business Plan
 LOOK BEFORE U LEAP
Tony worked for a local automobile dealership as
a technician for over 20 years. He always
received very high customer service ratings. One
day, Tony decided that because he was such a
good technician, he could make more money
working on his own. At a local print and signage
shop, he had business cards printed and a sign
made that read “Tony the Technician”. He quit
his job at the dealership on Friday, put his sign
up Sunday, and was open for business Monday.
QUESTION

What do you think are Tony’s chances for success? Discuss

what advice you would have given only if he had talked to
you about his idea first.

Planning is the key when starting a

business…
If you fail to plan, you plan to fail
BUSINESS
PLAN
Once you have settled on
a business idea, it is time
to start making plans for
the business Is a written document
that describes all the
steps necessary for
opening and operating a
successful business.
 Business Plan
 Provides detailed financial
 Describe what your information that shows how
business will produce, your business will succeed
how will you produce it
and who will buy your in earning a profit
product or service
 Describes plans for future
 Explains who will run your
business and who will growth of your business
supply it with goods
 States how your business
will win over customers
from competitors and Note: Writing a solid
what your business will business plan is critical
do to keep customers
because the plan can
make or break your
business
 PURPOSES OF A BUSINESS PLAN

1. A business plan explains the idea behind your

business and spells out how your product or
service will be produced and sold
2. A business plan sets specific objectives and
describes how your business expects to achieve
them.
3. A business plan describes the backgrounds and
experience of the leadership team of the business.
Basic Elements of the business plan
The content of the business plan for a small, home
based, single-owner business will differ from a
business plan for a large corporation with offices in
many cities. But regardless of the business, all
business plans serve the same basic purposes. They
should contain the same three basic components----
introductory materials, the main body and
the appendix (supporting documents)
Preliminaries

Title Table of
Page Contents

Statement Executive
of the
purpose summary
 Title Page
It includes name of the company, the date, the
owner of the company and the title of the owner,
and address and phone number of the company.

The word CONFIDENTIAL should also be included

at the bottom part of the bottom; others use a
separate sheet for the Statement of
Confidentiality.
 Statement of Purpose
A brief explanation of why you are
asking for a loan and what you plan
to do with the money.
 Executive Summary
 The short restatement of the report.
 It should capture the interest of the readers.
 Should be 1-3 pages only
 Should be written in a clear, simple style.

 “First to appear, last to prepare”

Parts of the Main Body
Introduction

Marketing

Operation

Finance

Concluding Statement
Part 1: Introduction
 a detailed description of the business and
its goals (Short term and long term)
The ownership of the business and the legal
structure
The skills and experience you bring to the
business
The advantages you and your business have
over your competitors.
the advantages that you may include
are:
• Performance
• Quality
• Reliability
• Distribution
• Price
• Promotion
• Public image or reputation
Part 2. Marketing
• PRODUCTS. Describe the products and services
and explain how they differ from those already in
the market. Highlight any unique features and
explain the benefits customer will receive by
purchasing from the business
• MARKET. Explain who your prospective
customers are, how large the market is for your
product, how to plan enter the market ad how to
deal with competition.
INDUSTRY. Description of the industry in
which the business will operate. This includes
the following:
- External factors affecting business
- Growth potential of the industry, including
growth forecast
- Economic trends of the industry
- Technology trends that may affect the
industry
• LOCATION

• Describe the exact place where the

business will be located, since this is often
a critical factor for its success.
Part 3. Operation

• This section should explain how the business will be

managed on a day to day basis .
• Discuss hiring and personnel procedures.
• Should also include information on insurance and
lease agreement.
• Describe the equipment necessary for production
and how products will be produced and delivered.
• It also includes a harvest strategy or exit
strategy,
Part 4. Financial Management
IDENTIFICATION OF RISKS. Prospective lenders
and investors will want to know what risk the
business will face and how plan to deal with it.
Risk typically faced by new Businesses include
competitors cutting prices, cost exceeding projections,
and demand for your product or service declining
overtime.
FINANCIAL STATEMENTS

A new business must include projected

financial statements in its business plan. An
existing business must include current as well
as projected statements. A financial
statements based on projected revenues and
expenses is called pro forma financial
statements.
FUNDING REQUEST AND RETURN
ON INVESTMENT. You must indicate
how much you need to borrow and how you
plan to use the money. You should give
investor an idea of how much money they
can expect to earn on their investment.
You should state how much money you are
personally investing . Investors will want to
know who will maintain your accounting
records and how they will be kept.
Part 5. Concluding Statement
• In this section, you should summarize the
goals and objectives you have for your
business and you should emphasize your
commitment to the success of the
business.
PART 1
 SET GOALS
For everything you do in life, you set goals.
Goals help you stay on track and follow
Specific through your
Goals plans.
should beThe best
specific andgoals
answerare SMART.
“What ?” ,“Why?”
Smart goals provide more direction
and “How?”

Measurable Goals should establish ways to measure your progress

Attainable Goals should not be too far out of reach

Realistic Goals should represent things to which you are willing to

commit

Timely Goals should have a timeframe for achievement

Example:
Goal : I will learn more about starting my
own business

I will learn more about starting my own

catering business through obtaining
information from Small Business
Administration and talking with the
owners of three local catering business
by the end of the month (SMART Goal)
 Your friend has set the following goal:

I plan to eat
healthier
??Is this a SMART GOAL

What suggestions would you make for improving

it?

SMART GOAL ACTIVITY

Legal Structure/ Type of
Ownership
1. Sole Proprietorship is a business with one
owner who operates the business on his
or her own or employ employees. A sole
proprietor can work as an independent
contractor or operate a small business.
Sole proprietors own businesses in many
industries. Many home-based businesses
are operated by sole proprietors. or more
persons
 Partnership is a non-incorporated business
that is created between two or more
people. In a partnership, your financial
resources are combined with those of your
business partner(s), and put into the
business. You and your partner(s) would
then share in the profits of the business
according to any legal agreement you have
drawn up.
There are three classification of partnerships:
1) general partnership (partner divide
responsibility, liability and profit or loss
according to their agreement), 2) limited
partnership (with at least one general
partner, there are one or more limited partner
who have limited liability to the extent of their
investment), and
3) limited liability partnership (all of the
partners have limited liability of the business
debts; it has no general partners).
A corporation is a legal entity that is
separate and distinct from its owners.
Corporations enjoy most of the rights and
responsibilities that an individual possesses
and has the right to enter into contracts, loan
and borrow money, sue and be sued, hire
employees, own assets and pay taxes.
A cooperative is owned and controlled by an
association of members. It can be set up as a
for-profit or as a not-for-profit organization. This
is the least common form of business, but can
be appropriate in situations where a group of
individuals or businesses decide to pool their
resources and provide access to common
needs, such as the delivery of products or
services, the sale of products or services,
employment, and more.
Activity: (20 minutes)
(In Narrative form)
1. Short description about the business (consider your first
and second activity yesterday)
2. Smart goals for the business
3. Legal structure
4. List the skills and experiences you have for the business
5. Competitive advantages of your business
PART 2
Part 2: MARKET ANALYSIS/MARKET
RESEARCH
 Overall market (consumer/customer)
 Competitive Factors ( impact of the following:
competitors, buyers, suppliers, substitute or alternative
products)
 Other Market Influences (technological changes,
government influences, social factors, unexpected
disturbances)
 Marketing Orientation (Business Philosophy)
 Marketing Strategy
 Contingency Plans (alternative plans)
WHAT IS MARKETING?

Marketing may be defined as a social and managerial process by

which individuals and groups obtain what they need and want
through creating and exchanging products and value with
others.
Other authors would define marketing as the managerial
process of producing, pricing, distributing and promoting
products to satisfy the needs, wants and demands of their
respective markets.
Important terms in Marketing
Needs are states of self deprivation felt by
humans. Needs also stand for Natural
essential elements designed for survival.

Wants are forms of human needs shaped

by culture and individual personality. These
pertain to the preferences of people
regarding their survival requirements.
Demands are simply needs and wants that are
backed up by consumer purchasing power. No matter
how strong the need or want of the market for the
product, if they do not have the money to buy such
product , marketers normally will not make the product
available.

Markets are simply customers and consumers of a

business. Technically, customers are the buyers of the
product while consumers are end users of the product.
Markets are characterized by:
1. Groups of people
2. With money to buy; and
3. Willingness to spend this money they
have.

Without these characteristics, target

group could not be considered a
market.
Products are bundles of attributes and
benefits designed to be offered to buyers
to satisfy their needs, wants and demands.
Products may be termed goods, if they are
tangible and services if generally
intangible.

Customer Value is technically defined as

the difference between what the customer
gains from the product and what the
customer loses from the costs of acquiring
such product.
Customer satisfaction is the extent to which product
tends to meet the expectations the buyers of a product
which they bought to fulfill their need and want.

Quality originally refers to the product’s freedom from

defects.
Transactions refer to an agreement between two parties
where both parties give up something to receive
something else. Usually the determining factor before
transaction is consummated between a buyer and seller
in the agreement on the price of the product

Exchange is known as the act of obtaining a desired

object from someone by offering something in return.
Welcome to day 9
Market Research
• Is a system for collecting, recording and
analyzing information about the
customers, competitors, products and
services.
Identify your market
Customer are the people or organization who buy
the product or services companies offer.

Note:
Before establishing your new enterprise, you will have to
determine who your primary customers are and whether
these customers are willing to buy your product or service
Understanding people needs and wants will allow you to
identify business opportunities
MARKET SEGMENTATION

Since the market are often

too large it is impossible to
please every one in the
Geographic data
market Segmenting a target
market helps you develop a Demographics
product/service that will
meet specific customer
needs
data
Psychographics
data
Behavioral
MARKET SEGMENTATION
MARKET SEGMENTATION Geographic data
Since the market are often
Demographics data
too large it is impossible to
please every one in the
Psychographics data
market Segmenting a target
market helps you develop a Behavioral
product/service that will
meet specific customer
needs Sample Customer Profile for a Sporting
Goods Store

• Individual 23 to 52 years of age

• Participates in sports
• Wants good quality sports equipment
• Looks for good prices
• Lives in Dagupan or near Metro Dagupan
• Average household income of P250,000
year.
 Secondary
Primary 1. Publication

1. Survey 2. Books

2. Observation
{
3. Information
on websites
3. Focus Group 4. Trade
Magazines
and journals
5. Newspaper
articles and
Where to get data? statistics
To identify the target market for your product or service,
you will need to answer the following questions :
1. Who is my potential market? Are my customers
individuals or companies?
2. If my customers are individuals, how old they
are? How much money they earn? Where they
live? How do they spend their money?
3. If my customers are companies, what industries
are they in? Where are those companies
located?
4. What needs or wants will my product or service
satisfy?
5. How many potential customers live in the area
in which I want to operate?
6. What is the demand for my products or services?
7. Where do these potential customers currently
buy the products or services I want to sell them?
8. What price are they willing to pay for my
products or services?
9. What can I do for my customers that other
companies are not already doing for them?
Direct Competition

Indirect Competition
 COMPETITORS ANALYSIS

1. Make a list of your competitors

2. Summarize the products and prices offered
by your competitors.
3. List each competitor’s strengths and
weaknesses
4. Find out the strategies and objectives of your
competitors
5. Identify the threats to your business from the
competition.
 COMPETITORS ANALYSIS
Competitor Price Location Facility Strength Weakness Strategy
Standard 80 Excellent Good Excellent Car wash Target a
Car Wash location not easily different
accessible market
Clay Car 65 Fair Good Low price Location Target a
wash different
market
Ray’s Wash 65 Good Fair Low price Facility Target a
and Go different
market
Royal Car 100 Fair Excellent Excellent Location, Offer lower
Wash facility high price prices,
better
service,
more
convenient
location
ACTIVITY:

In Narrative Form
1. Identify your market and make a
market profile (use the question
guide)
2. Prepare competitors analysis
The Marketing Environment
• Marketing Department – the single most
important department with which all other
departments have to work and be in consonance
with
• Marketing environment – where business
enterprises have to operate on all actors and
forces as they affect the enterprises’ marketing
abilities
 Internal Environment
 External Environment – micro and macro
environment
Micro-External Environment
• Suppliers – provide materials used by an
enterprise for its production/operations;
• Marketing channels – are firms/individuals
that make the enterprise’s products available
to customers;
• Customers – buyers of the products; also
known as the market;
• Competitors –direct competitors or indirect
competitors
• Publics – are the stakeholders of the
enterprise.
• Macro-External Environment – comprised of
the larger more uncontrollable forces. These are
the demographic, economic, natural,
technological, political, and socio-cultural
forces.
Market Segmentation Strategies

• Mass Marketing – where business enterprises

enter the industries of basic commodities and
provide the products for a broad market base.
• Market Segmentation – when enterprises
identify a specific target market from the entire
market base.
• Market Niche – “neglected part of the market”
P’s of Marketing
• Contrary to the popular belief, Product is not the first P
of Marketing. At the heart of Marketing is the market.
1. People – heart and soul of their business (literally, its
lifeblood)
2. Product – bundle of attributes & benefits designed to
be offered to buyers. It may be goods or services.
1. Convenience Products – almost always available in many
retail stores
2. Shopping Products – require a little bit of effort to find and
more expensive
3. Specialty Products – more expensive and require far greater
effort to acquire
4. Unsought Products – those that not too many people look for
nor are heavily advertised and promoted
 PRODUCT MANAGEMENT

Consumers buy a product because it meets their needs.

However, there is much more to a product than consumers may
realize.
The many aspects of a product that a business must spend time
developing and managing includes:
Branding
Packaging
Labeling
positioning
 “YOU HAVE TO MAKE
YOUR PRODUCT STAND
OUT FROM ALL THE
OTHERS IN THE
MARKET”
Brand is the name, symbol or design used to identify your
product.
Package is the box, container, or wrapper in
which the product is placed.
Label is where information about the
product is given on the package.
Label is where information about the
product is given on the package.
SAMPLE OF PRODUCT POSITIONING

Different products and services within the same category

serve different customer needs.
Positioning is creating an image for a product in the
customer’s mind. Businesses position a product in a
certain market to get a desired response. Product
features, price and quality maybe used for positioning.
Example: Jaguar and Kia sell automobiles, but these two
positioned very differently. Jaguar is a pricey cars
positioned to meet the needs of those consumers who
desire high quality and status, while Kia is positioned to
satisfy the need for an inexpensive family automobile.
• Price – is a prime consideration (costs & profits)
before a product is effectively sold; the actual
amount of money tendered by customers before
acquiring the product.
 Market Skimming – the new product is sold at a
higher price first, then brings this down later when
competition arises.
 Penetration Pricing Strategy – product is sold at
relatively low price compared to existing
competitors, and later on increase this price when a
sizeable and regular market has been established.
 PRICING
The PRICE is the actual amount a
customer pays for product or service.

Note: The price must be low enough to

encourage customer to buy from you, not from
your competitors but high enough that
revenues exceed expenses.
Things to consider in setting
PRICE OBJECTIVES
1. Return on Investment (ROI) is the amount
earned as a result of the investment and
usually expressed as a percentage.
Ex. You invested P5000 in your smoothie
business, you want your business to have 15%
return then you have to price your product in a
way that you will earn P750, since
P5000x.15=P750
2.Market Share is another consideration when
setting pricing objectives. Market share is a
business percentage of the total sales
generated by all companies in the same
market. The total market for a product must be
known in order for a market share to be
determined.
Example: If Jana’s community is spending
P1,750,000 a year on fast food and Jana’s store
sells products amounting of P192,500, their market
share will be 11%
Amount of Sales/ Total Market = Market Share
P192,500/1,750,000= 11%
(your objective in pricing your product depends on
target market share)
Determine a Price for a Product
• Demand –Based Pricing
– Pricing that is determined by how much
customers are willing to pay for the product. This
is determine through survey.
• Cost based pricing
- is determined by using the whole sale cost of an
item as the basis for the price charged
You can either mark up or mark down your price.
 Price a Service or an Idea
When setting the price for a service, it is important consider not
only the cost of any items used in providing the service but also the
amount of time and anything that is included with service.
1. Time based Pricing- the price to charge for
the services can be determined by the amount of
time it takes to complete the service. A service
provided must decide whether there will be a
separate charge for the material or materials will be
included.
2. Bundling- services are bundled, or combined
under one charge, rather than making the customer
pay for each individual part of the service.
 Pricing Strategies
1. Introductory Price
 Price Skimming
 Market Penetration Pricing
2 Discount Price
 Cash discounts (cash basis)
Quantity discount (volume)
Trade Discounts (Patrons)
Seasonal Discount (out of season products)
3. Psychological Price
 Prestige pricing -selling at a high price in order to create a
feeling of superior quality and social status. The customer
believe that the higher the price the higher the quality of
goods.

 Odd/even Pricing- customer have this feeling that when

price ends with odd number it sounds like cheaper
compared to an even
 Price Linings - offering different level of prices for a
specific category based on their features and quality.
 Promotional Pricing - this is offering lower price for
limited period of time. This is temporarily since it will return
to normal when promotion ends.
 Multiple Unit Pricing- pricing items in multiple (like just
bundles) like 100 for 3.
 What Would you do?
You are looking for a vendor to supply your new
business with a computer, a printer, and a copy
machine. You have contacted several vendors
offers you “special” deal if you accept his quote
before the end of the day. In addition to a
competitive price for the equipment, he is
offering you tickets to an PBA game in a private
stadium suite. He wants you to agree to the deal
without signing a contract and has asked that
you pay him in cash. What would you do?
• Placement or Distribution – designed to bring
products forward to customers and consumers.
 Indirect Channel – the entrepreneur, being the
source of product, takes advantage of wholesalers,
retailers and agents in the distribution process
 Direct Channel:
 Direct Selling – the entrepreneur contracts several
distributors to get products directly from him and do
their own retail.
 Network Marketing – an entrepreneur creates a series
of customers and buyers
• Promotion – designed to
communicate the product to the
customers.
PROMOTION STRATEGIES
Advertising is a form of promotion
designed to use TRIMP formula (TV, Radio,
Internet, Mobile and Print Media)

Advertising keeps your product in the public’s eye

by creating a sense of awareness. Advertising
should help business convey a positive image.
Once you choose the message, you will need to
decide which advertising medium to use. To
choose the medium, you will have to consider cost
and effectiveness in reaching your target audience
O Online advertising has become widely used by the
business. Online technology lets businesses interact with
customers through online chat rooms, blogs, and
newsletters.

Types of Online Advertising

Banner Ad – A graphic image or animation displayed with in a
rectangular box across the top or down the side of the web page
Floating Ad- An ad that moves across the screen or floats above
the page content
Wallpaper Ad- An ad that changes the background of the page
being viewed
Trick Banner – A banner ad that looks like a dialog box with
buttons, often n appearing like an error message or an alert
Pop Ad- A new window that opens in front of the current one,
displaying and advertisement
Paying for Online Advertising
Cost Per Mil (CPM) – the charge is based on the exposure of
the message to specific audience. CPM are prices per
thousand viewers reached with the message.
Cost per click (CPC) – the charge based on the number of
clicks on the advertisements.
Cost per Action (CPA)- the charge based on the user
completing a form for newsletters, or taking some action that
will lead to sale.
O Sales Promotions these are promotions that
heavily relies on promotional gimmicks (buy one take one,
holiday sale, midnight sales, volume sales, eat all you can
Direct Selling designed to use person to person
selling techniques. This is recommended for technical and
expensive products that require an expert or specialist to
explain the product mechanics.
O Public Relations is a promotion that generate public
awareness through publicities, interviews, press conference,
free product endorsements, sponsorship and etc.
 Activity
Prepare simple tag line
- present in class
-December 18, 2017
Develop a simple advertising
campaign
(TV advertisement with jingle)
- deadline of submission: Dec. 19,
2017
 4M’s of operations
O Manpower
- who work in the operation
of the organization ;
including the skills
needed.
 4M’s of operations
O Method
- is another essential input
to the operational system
because through the
knowledge of customer
wants and needs, product
and services can be made
available to them where
and when they like it to be.
 4M’s of operations
O Machine
- referring to the capital
items like drill presses,
typewriters, tools, building,
and property which are not
directly used up while the
product is being made.
 4M’s of operations
O Materials
- which are consumed in
the process of building
goods and performing
service;
Presentation of
outputs
O Develop a product
description
O Create a prototype of the
product
O Test the product prototype
 CHECKPOINT

What are some factors you

should consider when
selecting a site for your
business?
 What Went Wrong??
Jim Teal opened Jimmy T’s Rib House, and within
the first ten months, he was making profits. One
day a commercial realtor advised Jim that a
restaurant four times the size of the current space
was on the market. The realtor said he could get
Jim a good deal on the lease if he liked it.
Jim knew the city where the building was located
had no other barbeque rib restaurant. He
researched and verified the population numbers
and demographics for the geographical area. It was
in a good neighborhood, on a main road, just off
the freeway. He even did a traffic flow study, and
the numbers were terrific. He leased the building,
and the grand opening went well.
Then the business began to drop off.
Although there was a plenty of traffic, Jimmy
T’s was on the wrong side of the street.
Customers coming west from the freeway exit
could not cross the center island, and there
was a “NO U Turn” sign at the corner, When
Jim tried to improve visibility and signs to
attract more freeway traffic, he found that city
ordinances prevented it. After six months, Jim
took his loss and closed the new restaurant
 Think Critically…
1. What questions about location should Jim
have asked the realtor before assuming
the lease?
2. Who else should Jim have questioned
about the location?
FINANCING BUSINESS
Financing needs will vary depending on the
size and type of business you start.

The first thing a first time entrepreneur should do

is to prepare the start up cost and personal
financial statement.
 Startup Cost
Itemizing your startup cost is an important part of
determining how much money you need to start
your business. This includes (but not limited to)
Equipment and supplies, such as computers,
printers, telephone and paper
Furniture and Fixtures such as desk and chairs
Vehicles such as delivery truck
Remodeling such as electrical and plumbing
expenses
Legal and accounting fees
Licensing fees

Sample Startup Cost

 Personal Financial
Statement
In order to determine if you have the resources
you need to finance your business, begin by
assessing your Net worth.
Net worth is the difference between what
you own (assets) and what you owe (liabilities).
It is also called equity.
To know your net worth you have to prepare
your personal financial statement

Sample
There are two types of financing available to the business –
equity and debt financing
When obtaining financing, you must consider your company’s
DEBT TO EQUITY RATIO or the relation between the money you
have borrowed and the money you have invested in the
business (equity).
This ratio measures how much money a company can safely borrow
over time.
The formula
TOTAL LIABILITIES ÷TOTAL EQUITY
 A high ratio indicates that a business is mostly financed
through debt, while low ratio indicates that a business is
primarily financed through equity.

Note: Investors normally look into this and prefer low debt to
equity ratios (LDER). HDER indicates that a company may
not be able to generate enough cash to meet its debt obligations.
Equity Capital is a money invested in a business in return
for a share in the profits of the business.

Debt Capital is money loaned to a business with

understanding that the money will be repaid, usually with
interest.
 Bank loans may be secured or unsecured
Secured loans. Loans that are backed by collateral. Collateral
is property that the borrower forfeits if she defaults on the
loan.

Unsecured loans. Loans that are not guaranteed with

collateral. These loans are made only to banks most
creditworthy customers.
 Pro Forma Financial
Statements
The financial statements you prepare for your
business plan are pro forma financial
statements and are based on projections.
The cash flow, income statement and balance
sheet all tell you something about the
condition of your business.
CASH FLOW STATEMENT
is an accounting report that describes the way
cash flows into and out of your business over a
period of time. Because it deals with actual
cash coming in and going out of a business, it
shows how much money you have available to
pay your bills and whether you have enough
money operating your business.
Cash receipts include cash sales, collected
accounts receivable, tax refunds and fund from bank loans
and investors

Cash Disbursement may include payments

for cost of goods (what you pay to manufacturers or
wholesalers to get the product to sell), accounts payable, rent,
salaries, taxes, office supplies, utilities, insurances,
advertising, loans and other expenses.
Formula:
Cash receipts – Cash disbursements= Net Cash
Flow
Note: You should prepare monthly pro forma cash flow statements
for first year and annual statements for the second and third year.

Many entrepreneurs prepare two types of cash flow statement

– for best scenario (high cash receipts and low
disbursements) or worst scenario (lower cash receipts and
higher disbursements)

sample
 Income Statement
Shows the business revenues and
expenses incurred over a period of time and
the resulting profit or loss. For this reason it
is sometimes called profit/loss statement.

While cash flow statement deals with actual

cash coming in and going out, the income
statement shows revenues that you have
not yet received and the expenses that you
have not yet paid.
The following are the parts of pro
forma income statement
Revenue – the value of the goods/services a business
sells to the customer (revenue=quantity x price)
Cost of good sold – the cost of inventory a business
sells during a particular period of time
Gross Profit – the difference between revenue and cost
of goods sold
Operating expenses – expenses necessary for the
operation of the business
Net income before taxes – amount remaining after the
cost of goods sold and operating expenses are deducted
from revenue
Net income/loss after tax – amount remaining after
payment of taxes.

sample
 Balance Sheet
Is a financial statement that list what a
business owns, what it owes and how much it
is worth at a particular point in time. It is
based on the accounting equation:

ASSETS = LIABILITIES +
OWNER’S EQUITY
Assets are items of value owned by the business
Current Assets, often referred as the liquid assets because it
can be converted to cash easily. It includes cash, inventory,
unused supplies, stock, bonds and etc. Another special type of
current asset is account receivables (A/R)
Fixed Assets also referred as illiquid assets because they
cannot be converted into cash easily.
Reduction in Assets
Some customers fail to pay for the merchandise they
purchased on credit. The amount a company estimates it will
not receive from customers is known as allowance for
uncollectible accounts. This amount is subtracted from the
assets (A/R).
The lowering of an asset’s value to reflect its current
worth is called depreciation. It is deducted to fixed assets.
Liabilities
Longer-term liabilities are debts that are payable over a year or
longer

Current liabilities are debts due to paid in full in less than one
year.

Sample
 Activity
Prepare a Forma Financial Statements for your
business
Pre start up cost
Cash Flow
Income Statement
Balance Sheet
SYNTHESIS
Earning while
Learning
Enjoying while
Working
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