ENTREP - BUSINESS IMPLEMENTATION Flashcards
The purposes of the business plan are:
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- Entice partners, investors, and bankers to fund a business venture.
- Communicate what the enterprise is all about, what market it wants to serve.
- Show what financial returns it could muster.
The ____ must be very clear about the purpose in establishing the enterprise.
Entrepreneur
Whether it is for generating profits or feeding the family, making a difference in the industry or actualizing the self, the purpose must be ____ ____ to motivate the entrepreneur.
compelling enough
The enterprise must state its mission statement clearly for:
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01 The sake of the customers being wooed;
02 The investors who need to know what they are getting into;
03 The financiers evaluating the enterprise; and
04 The government functionaries who must regulate the activities of industries and businesses.
The business plan should contain important information about the following:
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➢The business itself;
➢The organizers;
➢The management and technical people;
➢The financial structure;
➢Its market potential;
➢Its target market;
➢Its projected sales, expenses, and profits; and
➢Its probable risks.
It should begin with business concept and the vision for the enterprise in the next three to five years.
Business Plan
It should proceed to an enumeration of business objectives, key result areas, and performance indicator. An overall enterprise strategy should then be articulated to show how the performance could be attained.
Business Plan
Business Plan should begin with business concept and the vision for the enterprise in the next ____ ____ ____ years.
three to five
The business plan should contain an executive summary of the following:
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- The organizers and the key people behind the nosiness and why these people have the resources, talents, skills, and technology to achieve success;
- The market being targeted and why there is enough market potential to justify the business;
- How the business will be operated and organized, including all outsourcing, subcontracting, franchising, and licensing agreements;
- The products or services to be offered and why they are right for the market;
- The investment capital required for the business and what exactly it would be used for;
- The technology, the technical expertise, the equipment, and material suppliers to be utilized;
- The capital structure (short and long term debt, stockholders’ equity) of the business;
- The operating budget, financial projections (income statement, balance sheet, cash flow), and return on investment prospects; and
- The risks in the business and the contingency measures to counterpart them.
The Business Plan must be able to estimate the capital required by the enterprise. The capital required would be dictated by the investment in the assets of the enterprise. These assets are composed of the following:
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- The current assets, which are short-lived assets. They are composed of cash, inventory, accounts receivables, and other current assets.
- The long-lived or fixed assets. They are composed of property, plant, and equipment.
- The other assets. They are composed of organizational and pre-operating expenses. Interest rate, therefore, is the obvious choice of
the manager when asked to make a decision
They are composed of cash, inventory, accounts receivables, and other current assets.
Current assets, which are short-lived assets
They are composed of property, plant, and equipment.
Long-lived or fixed assets
They are composed of organizational and pre-operating expenses. Interest rate, therefore, is the obvious choice of the manager when asked to make a decision.
Other assests
The assets of the enterprise are financed
by its liabilities. These liabilities are
composed of:
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- Current liabilities such as suppliers’ credit and other short-term credit;
- Long term debt; and
- Owner’s equity
Types of Business Organization
Sole Proprietorship
Partnership
- General Partnership
- A Limited Partnership
Corporation
- Stock Corporation
- Non-Stock Non- Profit Corporation
- Close Corporation
- Corporate Sole
The simplest and easiest enterprise to organize. The owner or the entrepreneur has sole control over the enterprise. He or she reaps all the profits and, also, all the losses. But he or she will also incur all the risk.
Sole Proprietorship
Sole Proprietorship permits & clearances:
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✓Barangay clearance
✓Fire safety clearance
✓Certificate of electrical inspection
✓Certificate of occupancy
✓Department of Trade and Industry (DTI) certificate
✓Lease contract if space is leased
✓Locational clearance
If two or more persons bind themselves into a contract to contribute money, property, and expertise in a common venture with the intention of dividing the profits among themselves, then they would have entered into a ____
Partnership
Composed of partners who are liable individually and collectively to all those who have claims against them.
General Partnership
Consist of partners who have limited liabilities while others in the partnership have unlimited liabilities. A limited partner is not personally liable for all the obligations of the partnership beyond his or her prorated capital contribution to the partnership.
A Limited Partnership
The partnership should obtain all the required government clearances, permits, and licenses. It should get:
- A bank certificate of deposit on the money contributions of the partners; and
- The approval for its partnership name form the Department of Trade and Industry.
The third form of business organization. Like the partnership, the ____ also has a separate legal personality quite distinct from the investors who contributed money to the enterprise.
Corporation
Four types of Corporation
- Stock Corporation
- Non-Stock Non- Profit Corporation
- Close Corporation
- Corporate Sole
Issues capital stocks divided into shares (or proportions of the total capital).
Stock Corporation
Is organized to carry out a purpose or purposes other than generating profits for investors.
Non-Stock Non-Profit Corporation
Has articles of incorporation that limit the ownership of issued stocks to at most 20 persons.
Close Corporation
It is a special form of corporation allowed by law, usually associated with the clergy.
Corporation Sole
A report that shows the financial activities and performance of a business. It is used by lenders and investors to check a business’s financial health and earnings potential.
Financial Statement
Focuses on the revenue, expenses, gains, and losses of a company during a particular period.
Income statement
There is usually a very close relationship
between Sales and Cost of Sales (or Cost of
Goods Sold). Many Companies, in determining
their selling prices, conveniently add a specific
percentage mark-up or margin to the Cost of
Sales, thus establishing a predictable ratio
between the two items. If an enterprise decides
to slap a hundred percent mark-up on its Cost of
Sales, the Sales figure will double the Cost of
Sales. As a percentage, Cost of Sales will,
therefore, be fifty percent of Sales.
Income Statement Forecasting
A financial report that summarizes the financial state of a business at a point in time. It provides an overview of the value of a business’s assets, liabilities, and owner’s equity.
Balance Sheet
Forecasting what the Balance Sheet of an
enterprise will look like in the future
depends a lot on the future Sales. The
Current Assets of the balance Sheet
include Cash, Marketable Securities,
Accounts Receivables, Inventories (Raw
Materials, Work-in-Process, and Finished
Goods), and other current Assets. Assets
in the Balance Sheet must always equal
liabilities and owners’ equity.
Balance Sheet Forecasting
The cash that flows into and out of various financial assets for specific periods of time. It’s usually measured on a monthly or quarterly basis. It doesn’t measure the performance of any single asset but emphasizes how cash is moving.
Funds Flow
The financial forecaster should compute for the increase
or decrease in the different items found in
the Assets and Liabilities columns, when
comparing the actual or previous year’s
Balance Sheet and the Pro Forma Balance
Sheet. Decreases in Assets and increases
in Liabilities are sources of funds, while
increases in Assets and Decreases in
Liabilities are uses of funds.
Funds Flow Forecasting
Is a measurement of the amount of cash that comes into and out of your business in a particular period of time.
Cash Flow
The entrepreneur or finance manager is
concerned about the enterprise’s survival
on a day-to-day basis as well as its
long-term sustainability. Cash is a
precious commodity that will make the
enterprise live on and on. It is crucial,
therefore, to monitor and budget the
enterprise’s cash position on a daily,
weekly, monthly, and yearly basis.
Cash Flow
Forecasting
This was introduced as a
method to evaluate business
investments.
Income and Cash payback
period
The ____ ____ ____ ____ ____ ____ ____ would help the entrepreneur get a firmer grip on the viability of his or her enterprise.
Construction and forecasting of Financial Statements
