ACTIVITY SHEET IN BUSINESS ENTERPRISE SIMULATION
Third Quarter
Name: __________________________ Grade Level and Section: ________
School: _________________________ Date: ________________________
Teacher: ________________________ Score: _______________________
I-Title: FINANCIAL PLAN
II-MELCs: Craft a financial plan, the inputs of which are from the results of the
marketing plan (sales) and operations plan (operating costs), and which will define the
financial goals that will be his/her target upon eventual execution
(ABM_BES12-Id-j-c8)
III-Instructions: Study the given text on Operations Study.
Financial Study
Benito, Pao, and Yumang detailed the sources of funds for enterprise operations
in Exploring Small Business and Personal Finance (2016). For this Business Enterprise
Simulation course, only short term funds are utilized to fund the working capital of the
enterprise.
The financial analysis concepts used for the course include profitability and
vertical and horizontal analysis. Other performance measurement tools may be added,
dependent on the financial objectives established in 2.1.
Profitability will measure the gain or return on the owner’s equity or investment.
Vertical analysis matches the amounts or accounts on a common-size financial
statements through the use of percentages of a common base. For income statements,
each account is computed as a percentage of sales. Horizontal analysis involves
matching accounts in the financial statements through percentage change circulations,
for two or more consecutive periods.
Financial Plan
Since the Business Enterprise Simulation course will be implemented for a short
term period, the financial plan will involve forecasting only the cash financing
requirement of the enterprise.
Benito, Pao, and Yumang (2016) cited the cash budget for this type of short-
term financial planning. Sample cash budgets are shown in Simulation Activity 8:
Financial Study for the service and merchandising projects in this course.
Cash receipts are drawn from the forecasted sales value in the marketing study.
Cash disbursements are taken from the cost of product or service in the operations
study. The sample cash budgets in the annexes may be revised for the period
coverage of the enterprise life, which is determined by the academic communities.
Working capital is used to purchase materials and/or supplies required for the
business to operate. It funds, in effect, the ‘cost of doing businesses’. It may be used
as the target cash balance or minimum cash balance in the cash budget form.
Although it is possible to allow the enterprise groups to buy the requisite
materials and supplies on credit, it may be practical to enforce only cash transactions
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for the course, again due to time constraints. If, however, credit transactions are
permitted, interest charges, or credit terms need to be documented by the learner-
entrepreneurs.
It is helpful to review the ‘buying and selling’ concepts in Business Mathematics
for Filipinos (Chan Shio et al. 2017), for the aforementioned cash and credit dealings.
The Business Enterprise Simulation course also assumes that no capital
expenditure is expected for the learner-entrepreneurs. Any assets required for the
projects may be acquired through rental activities. If, however, the asset life can or
may be used only for the period coverage of the project, depreciation expense in
computed.
It is recommended that the school community set maximum capitalizations for
the enterprise groups. The maximum capitalization is equivalent to the proprietor’s
equity required so that the business can operate.
Estimates of the proprietor’s equity are shown below for typical expense times.
Note that the equity provision is for the entire period covered for business execution
and implementation.
1. Salaries and wages
a. Number of employees x wage rate per period x period covered
2. Materials expenses (or cost of sales for merchandising projects)
a. Number of units x purchase cost per unit
3. Supplies expenses (receipts, office supplies, and/or service supplies)
a. Number of units x purchase cost per unit
4. Marketing expenses (posters, flyers, giveaways, and/or product samples)
a. Units x purchase cost per unit
5. Transportation expenses
a. Gas expenses, vehicle hire, and/or vehicle fares
6. Communication expenses
a. Phone and internet charges
7. Utilities
a. Power charges for the period covered
b. Water charges for the period covered
8. Registration, taxes, and licenses
9. Representation expenses
Financial Statements
The income statement, also called the profit and loss statement, is required for
the Business Enterprise Simulation course. Sample income statements for service and
merchandising ventures are shown Simulation Activity 8: Financial Study. Other
financial statements, balance sheet or statement of owner’s equity and cash flow
submission is dependent on the financial objectives of the enterprise groups.
As the course is designed for single proprietorships, the minimum accounts for
the income statement, as cited by Frias (2016) are as follows:
1. Revenue (or sales)
2. Cost and expenses
a. Cost of goods sold
b. Selling expense
c. Administrative expense
3. Net income or net loss
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The comparative owner’s equity statement may be used to measure
performance for the business plan execution and implementation.
The Statement of Owner’s Equity has the same accounts as the balance sheet,
and utilizes the accounting equation-
Assets = Liabilities + Owner’s Equity
Financial Analysis
As previously cited, only horizontal and vertical analysis and profitability ratios
are required for the Business Enterprise Simulation course. Submission of other
performance measurements is dependent on the financial objectives of the enterprise
groups.
Horizontal Analysis is a left-to-right comparison of performance for comparative
periods. For the course, a minimum of three periods may be compared to evaluate
increases or decreases. The trends, increases or decreases, are expressed as
percentage of change, as shown in the following formula:
Percentage of change = Amount of change/Base period amount x 100
The base period used may be the first period for the project.
Vertical analysis evaluates financial statement accounts with each account
expressed as a percentage of the base account. This performance measurement
determines proper balances for given accounts. For both service and merchandising
enterprises, the biggest percentages are for salaries and wages. Service businesses
may also have high percentages for materials and supplies, while merchandising
businesses may have high percentages for cost of goods (or the purchase cost of
goods sold). The usual base account used is the sales figure.
Ration analysis for the course is limited to profitability ratios. Liquidity or
solvency ratios, if required, may be due to the financial objectives of the enterprise
groups.
Profitability ratios measure the capability of the enterprises to earn profits from
their operations. Frias (2016) cites the following profitability ratios:
Ratio of gross profit to net sales = gross profit/net sales
Ratio of net income to net sales = net income/net sales
Operating ratio = cost of sales + operating expenses/net sales
The ratio of gross profit to net sales shows if the gross profit is enough to cover
all business expenses and also earns income for the owner. The decision on how
sufficient the gross profit is lies with the owner. If a higher gross profit is desired, the
enterprise may be driven out by competition. It is helpful for ‘start-up’ enterprises to
get gross profit information from similar businesses so that they can peg their own
gross profit objectives against these organizations.
The net profit ratio or ratio of net income to net sales measures profitability for
every peso sale. For example, a net profit ratio of P0.08 says that a net income eight
centavos is earned for every peso sold.
The operating ratio is useful in evaluating the efficiency of operations. For
example, an operating ratio of P0.92 means that for each peso net sale, ninety-two
centavos are spent for cost of goods sold and operating expenses. It is obvious that a
low operating ratio is preferred, as it results to higher income after operational
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expenses.
Other profitability ratios that may be used are
Ratio of income to owner’s equity = net income for the period/average owner’s
equity;
Ratio of net income to total assets = net income/total assets; and
Ratio of net sales to total assets = net sales/total assets.
A high ratio of net income to equity signifies that the owner is acquiring a high
return on investment. A low net income to total assets ratio shows that the enterprise
has low operational efficiency, while a high net sale to total assets ratio indicates that
the business is making productive use of its assets.
For the Business Enterprise Simulation course, these ratios may be required if the
financial objectives of the enterprise groups state measurement of these accounts.
IV. Activities
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Simulation Activity 8: Financial Study
Instructions: Answer the following questions based on business opportunity idea you
have had identified in your community.
1. How much money do you need for the business enterprise?
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2. Where will you get the money?
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3. On what account will you spend the money on?
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4. What will your net income be at the end of the project?
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5. Will you able to recover the money you invested at the end of the project?
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PROJECTED INCOME
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Instruction: Craft below a projected income on your business operation. Project a sales
accumulated by week/daily basis. Religiously tally the expenses to be incurred not just
the cost of good sold but also the operations expenses.
V. Closures
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At the end of the chapter, write two or three sentences to complete the following:
I realized that:
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I resolved that:
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VI. References
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Victoria Garalde-Orjalo, Erlinda C. Pefianco, ED.D: Business Enterprise Simulation:
Business Incubation and ABM Integration
Prepared by:
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Subject Teacher
