CABRERA, MARIA RAFAELLE P.

BSIT FOOD TECHNOLOGY 2A

ENTREPRENEURSHIP AND COOPERATIVES

COMMON SOURCE OF CAPITAL: DEBT FINANCING

1. What is the importance of capital in establishing a business?

Capital is essential for establishing a business because it provides the necessary financial
resources to cover the startup costs and operational expenses. These costs include registering
the business, purchasing equipment, securing office or retail space, and acquiring inventory or
raw materials. Without adequate capital, it becomes difficult to turn an idea into a tangible,
functioning business. It serves as the foundation upon which everything else is built.

Additionally, capital ensures the business can operate smoothly during its early stages, when it
may not yet be profitable. It allows a business to manage its cash flow, pay employees, and cover
ongoing operational costs like utilities, marketing, and inventory replenishment. Sufficient capital
also provides a cushion for unexpected expenses and helps the business stay afloat until it
reaches a point of profitability. Overall, capital is a critical element in reducing risk and ensuring
a business has the financial stability to grow and succeed.

2. Do investors help the country? How?

Yes, investors can significantly help a country by contributing to its economic growth and
development. When investors put money into businesses, they help create jobs, stimulate
innovation, and improve infrastructure. This can lead to higher productivity, increased tax
revenue, and a stronger economy. Additionally, investment often drives technological
advancements and fosters competition, which can improve the overall business environment. By
supporting local enterprises or even investing in international markets, investors help promote
economic stability and sustainable growth, benefiting both the private and public sectors.

3. Difference between Debt Financing and Equity Capital.

Debt financing involves borrowing money from external sources, such as banks or other lenders,
that must be repaid over time with interest. In this arrangement, the business retains full
ownership and control but takes on the responsibility of repaying the debt, typically in fixed
installments. If the business fails to meet its repayment obligations, it may face legal
consequences, including the potential loss of assets. Debt financing is often preferred by
businesses that want to avoid giving up ownership and control but must ensure they can
generate sufficient cash flow to meet their obligations.

Equity capital, on the other hand, involves raising funds by selling ownership stakes in the
company, usually in the form of stocks or shares. Investors who purchase equity become part-
owners of the business and share in its profits and risks. Unlike debt financing, there is no
obligation to repay equity investors, and they have a claim on the company’s assets only if the
business is liquidated. However, the trade-off is that the business must give up some level of
 control and decision-making power, as equity investors typically have voting rights. Equity
financing is often used by businesses looking for long-term growth without the burden of regular
repayments.

4. In your own opinion, what is the best source of capital?

In my opinion, the best source of capital depends on the business’s stage, needs, and goals. For
early-stage startups, equity capital can be a great choice because it doesn't require immediate
repayment and allows the business to focus on growth without the pressure of debt. However,
for established businesses with steady cash flow, debt financing might be ideal since it allows the
owner to retain full control while benefiting from tax-deductible interest payments. The best
source of capital is ultimately one that aligns with the company’s financial situation, risk
tolerance, and long-term objectives, ensuring they have the resources they need without
overburdening themselves with debt or losing too much ownership.

UNIT IX: STARTING THE BUSINESS

1. What is the first step in starting a business?

The first step in starting a business is to come up with a clear business idea or concept. This
involves identifying a product or service that meets a need in the market, understanding the
target audience, and assessing the competition. It's essential to conduct thorough research to
validate the idea, ensuring there is demand and that the business can be sustainable in the long
run. Once the concept is solid, the next step is to create a detailed business plan, which outlines
goals, strategies, and financial projections to guide the business through its early stages and
beyond. This foundational work helps set a clear path for success.

2. Why is market research important for a new business?

Market research is crucial for a new business because it helps entrepreneurs understand the
needs, preferences, and behaviors of their target audience, as well as the competitive landscape.
By gathering data on market trends, customer demographics, and potential challenges,
businesses can make informed decisions about product offerings, pricing strategies, and
marketing tactics. Market research reduces the risk of failure by ensuring the business addresses
a real demand and positions itself effectively in the market. It also provides valuable insights that
can guide product development and help businesses stand out from competitors.

3. What is a unique selling proposition?

A unique selling proposition (USP) is the distinctive feature or benefit that sets a business,
product, or service apart from its competitors in the market. It highlights what makes the
offering unique and why customers should choose it over alternatives. The USP can be based on
factors like quality, price, customer service, innovation, or convenience. Essentially, it answers
the question: "What do we offer that others don’t?" A strong USP helps businesses attract and
retain customers by clearly communicating their value and differentiating them in a crowded
marketplace.
 4. Which legal structure offers the advantage of limited liability for its owners?
The legal structure that offers the advantage of limited liability for its owners is a Limited Liability
Company (LLC) or a Corporation. In both structures, the owners (members in an LLC or
shareholders in a corporation) are protected from personal liability for the company's debts and
legal obligations. This means their personal assets, such as homes and savings, are generally not
at risk if the business faces financial troubles or lawsuits. This protection makes LLCs and
corporations popular choices for entrepreneurs looking to minimize personal risk while
maintaining a separate legal identity for their business.

5. What is an essential component of a marketing plan for a new business?

An essential component of a marketing plan for a new business is a target market analysis. This
involves identifying and understanding the specific group of customers the business aims to
serve, including their demographics, needs, preferences, and buying behaviors. By clearly
defining the target audience, a business can tailor its marketing strategies, messaging, and
product offerings to effectively reach and engage potential customers. This analysis helps ensure
that marketing efforts are focused and cost-effective, maximizing the impact of campaigns and
increasing the likelihood of success in a competitive market.

UNIT XI: FINANCIAL MANAGEMENT

1. What is the purpose of a balance sheet?

The purpose of a balance sheet is to provide a snapshot of a company's financial position at a
specific point in time. It outlines the company's assets, liabilities, and shareholders' equity,
helping stakeholders assess its financial health, liquidity, and overall stability. By analyzing the
balance sheet, investors, creditors, and management can make informed decisions regarding
investments, lending, and operational strategies. It also ensures transparency and compliance
with accounting standards, facilitating better financial planning and risk management.

2. What does ROI stand for in financial management?

ROI stands for Return on Investment in financial management. It is a key performance metric
used to evaluate the profitability and efficiency of an investment. ROI is calculated by dividing
the net profit from an investment by the initial cost and expressing the result as a percentage. A
higher ROI indicates a more profitable investment, making it a crucial tool for businesses and
investors to assess financial performance, compare investment opportunities, and make
informed decisions about resource allocation.

3. What is depreciation?
Depreciation is the process of allocating the cost of a tangible asset over its useful life to reflect
its gradual loss of value. It is a non-cash expense that helps businesses account for wear and
tear, obsolescence, or usage of assets such as machinery, buildings, and vehicles. Depreciation
allows companies to match expenses with revenue, ensuring accurate financial reporting and tax
benefits. Common methods of calculating depreciation include straight-line, declining balance,
and units of production, each affecting financial statements and tax liabilities differently.
4. What is liquidity in financial management?
Liquidity in financial management refers to a company's ability to meet its short-term obligations
by converting assets into cash quickly and efficiently without significant loss in value. High
liquidity ensures that a business can pay off debts, cover operational expenses, and handle
unexpected financial needs. Key liquidity measures include the current ratio and quick ratio,
which compare a company’s liquid assets to its liabilities. Maintaining adequate liquidity is
crucial for financial stability, preventing cash flow problems, and ensuring smooth business
operations.

5. What is working capital?

Working capital is the difference between a company's current assets (such as cash, accounts
receivable, and inventory) and its current liabilities (such as accounts payable and short-term
debt). It measures a business's short-term financial health and operational efficiency, indicating
its ability to cover day-to-day expenses and meet short-term obligations. Positive working capital
suggests strong liquidity and financial stability, while negative working capital may signal
potential cash flow issues. Effective working capital management helps businesses optimize cash
flow, reduce financial risks, and support growth.

6. What is the purpose of a cash flow statement?

The purpose of a cash flow statement is to provide detailed information about a company’s cash
inflows and outflows over a specific period, offering insights into how well the company
manages its cash to fund operations, investments, and financing activities. Unlike the income
statement, which includes non-cash items like depreciation, the cash flow statement focuses
purely on cash transactions, making it a valuable tool for assessing a company’s liquidity and
cash position. It is especially useful for stakeholders like investors, creditors, and management to
evaluate whether the company generates enough cash to meet its short-term liabilities and
sustain operations.

7. What is the difference between gross profit and net profit?

Gross profit is the difference between a company’s revenue and its cost of goods sold (COGS),
representing the profit a business makes after subtracting the direct costs associated with
producing goods or services. It reflects the efficiency of production or service delivery but does
not account for operating expenses, taxes, interest, or other non-operational costs. Gross profit
provides insight into how effectively a company is generating profit from its core business
activities before other financial factors come into play. It is typically used to assess pricing
strategies, production costs, and overall profitability at a basic level.

Net profit, on the other hand, is the amount of money a company retains after accounting for all
expenses, including operating expenses (like rent, salaries, and utilities), interest, taxes, and
depreciation. It represents the final profit that is available to shareholders or reinvested in the
business. Net profit is a more comprehensive measure of a company’s overall financial health, as
it incorporates all aspects of financial performance, from revenues to expenses. A higher net
profit indicates strong financial performance and is often used to evaluate a company’s long-
term viability, whereas gross profit focuses more on short-term operational effectiveness.
UNIT XII: FRANCHISING

1. What is the term used to describe the party that grants the franchise rights to another party?
The term used to describe the party that grants the franchise rights to another party is the
franchisor. The franchisor is typically the owner of the brand, business model, and intellectual
property, and it allows another party, known as the franchisee, to operate a business under its
name and system. In exchange for the franchise rights, the franchisor typically receives fees or
royalties from the franchisee. The franchisor provides ongoing support, training, and guidelines
to ensure the franchisee adheres to the established standards and business practices,
maintaining consistency across all franchise locations.

2. What is a franchise fee?

A franchise fee is an initial upfront payment made by the franchisee to the franchisor in
exchange for the right to operate a business under the franchisor's brand and system. This fee
typically covers the costs of granting the franchise rights, providing initial training, and giving the
franchisee access to the franchisor’s business model, intellectual property, and support services.
The franchise fee is usually paid once at the beginning of the franchise agreement and can vary
widely depending on the brand, industry, and the level of support provided. It is separate from
ongoing royalty payments, which are usually a percentage of the franchisee’s revenue.

3. What is the term used to describe the ongoing fees paid by franchisees to the franchisor?
The term used to describe the ongoing fees paid by franchisees to the franchisor is royalty fees.
These fees are typically a percentage of the franchisee’s gross sales or revenue and are paid
regularly (often monthly or quarterly) as part of the franchise agreement. Royalty fees are a way
for the franchisor to earn continuous income from the franchisee’s business operations, allowing
the franchisor to maintain and support the brand, marketing efforts, and operational systems.
They help fund the ongoing development, training, and resources provided to franchisees to
ensure consistency across all franchise locations.

Royalty fees also provide the franchisor with an incentive to help the franchisee succeed, as the
franchisor's income is directly tied to the franchisee’s sales performance. In addition to royalties,
some franchise agreements may also require other ongoing fees, such as advertising or
marketing fees, which contribute to collective brand-building efforts. These ongoing fees are
essential for maintaining the overall success and growth of the franchise system, benefiting both
the franchisor and the franchisees.

4. What is co-branding in the context of franchising?

Co-branding in the context of franchising refers to a partnership between two or more
established brands to offer their products or services together in a shared location or under a
single business model. In this arrangement, each brand retains its identity, but they collaborate
to enhance customer experience, increase market reach, and share operational costs. For
example, a fast-food franchise might partner with a coffee shop franchise, allowing both brands
to coexist in the same space, offering complementary products. Co-branding can attract a
 broader customer base, optimize resources, and drive sales for both franchises, benefiting from
the combined brand recognition and customer loyalty.

UNIT XIII: SOCIAL RESPONSIBILITIES

1. What is corporate social responsibility (CSR)?

Corporate Social Responsibility (CSR) refers to a business model in which companies integrate
ethical practices into their operations, aiming to make a positive impact on society and the
environment beyond their financial goals. CSR involves activities like reducing carbon footprints,
supporting local communities, ensuring fair labor practices, and promoting sustainability. By
prioritizing social and environmental concerns alongside profit, companies demonstrate
accountability and contribute to the well-being of stakeholders, including employees, customers,
investors, and society as a whole. CSR is seen as a way for businesses to align their operations
with broader societal values and foster goodwill while enhancing their reputation and long-term
success.

2. Why is it important for business to practice CSR?

Practicing Corporate Social Responsibility (CSR) is important for businesses because it helps build
trust and strengthen relationships with customers, employees, investors, and the community. By
demonstrating a commitment to ethical practices, sustainability, and social impact, companies
enhance their reputation and can differentiate themselves in competitive markets. CSR also
attracts socially-conscious consumers and employees who value responsible behavior, which can
lead to increased customer loyalty and improved talent retention. Additionally, businesses that
actively engage in CSR are often better positioned to manage risks, comply with regulations, and
contribute to long-term sustainability, benefiting both the company and society.

3. What is sustainability in business?

Sustainability in business refers to the practice of operating in a way that meets the needs of the
present without compromising the ability of future generations to meet their own needs. It
involves adopting environmentally friendly practices, promoting social equity, and ensuring
economic viability. Sustainable businesses focus on minimizing their environmental impact
through resource conservation, reducing waste, and addressing climate change while fostering
fair labor practices, supporting local communities, and operating ethically. By integrating
sustainability into their strategies, businesses can achieve long-term growth, enhance brand
value, and contribute to global efforts for a more sustainable and equitable world.

4. Which stakeholder groups are typically considered in CSR initiatives?

In CSR initiatives, the primary stakeholder groups typically considered include employees,
customers, investors, suppliers, local communities, and the environment. Employees benefit
from fair labor practices, a safe work environment, and opportunities for personal and
professional growth. Customers are engaged through products and services that are ethically
sourced, sustainable, and socially responsible. Investors are increasingly interested in businesses
that align with sustainable practices, which can enhance long-term profitability and reduce risks.
Suppliers are encouraged to adopt ethical sourcing and environmental standards. Local
 communities are supported through charitable efforts, job creation, and social investment, while
businesses also strive to reduce their environmental footprint, ensuring that their operations do
not deplete natural resources or harm ecosystems. By considering these diverse groups,
businesses can create more holistic and impactful CSR strategies.

5. What is the triple bottom line approach to CSR?

The triple bottom line approach to CSR is a framework that evaluates a company’s performance
based on three key pillars: people, planet, and profit. This approach expands the traditional
focus on financial profitability to include social and environmental impacts. People refers to the
company’s efforts to improve social well-being, such as fair labor practices, community
development, and stakeholder engagement. Planet involves minimizing environmental harm by
adopting sustainable practices, reducing carbon footprints, and conserving resources. Profit
continues to focus on financial performance, ensuring long-term economic viability. By balancing
these three aspects, the triple bottom line approach encourages businesses to pursue long-term
value creation that benefits society, the environment, and shareholders alike.

6. What is ethical sourcing?

Ethical sourcing refers to the practice of ensuring that products and materials are obtained
through responsible and sustainable methods, considering the social, environmental, and
economic impacts of their production. This includes ensuring fair wages, safe working
conditions, and respect for human rights in the supply chain, as well as minimizing
environmental harm through sustainable resource use and reducing waste. Companies that
engage in ethical sourcing work closely with suppliers who adhere to these principles, often
conducting audits or using certifications to verify compliance. Ethical sourcing helps companies
maintain integrity, promote social responsibility, and meet the growing consumer demand for
products that are produced with care for people and the planet.

7. What role does transparency play in CSR?

Transparency plays a critical role in CSR by fostering trust and accountability between a business
and its stakeholders, including customers, employees, investors, and the broader community.
When companies openly share their CSR practices, goals, and progress, they demonstrate
honesty and a genuine commitment to ethical and sustainable practices. Transparency allows
stakeholders to assess the company’s impact on social, environmental, and economic issues,
ensuring that the business is held responsible for its actions. It also helps businesses build
credibility, mitigate risks, and attract consumers and investors who value openness and integrity.
By being transparent, companies not only align with ethical values but also enhance their
reputation and long-term success.

8. What are the Sustainable Development Goals (SDGs)?

The Sustainable Development Goals (SDGs) are a set of 17 global objectives established by the
United Nations in 2015 to address the most pressing social, environmental, and economic
challenges facing the world. These goals aim to achieve a more equitable, sustainable, and
prosperous future for all by 2030. The SDGs include targets related to areas such as poverty
eradication, quality education, gender equality, clean water and sanitation, affordable and clean
 energy, climate action, and economic growth. Each goal is interconnected, and their collective
achievement requires coordinated efforts from governments, businesses, and civil society. By
adopting the SDGs, businesses and organizations contribute to global efforts to tackle urgent
issues and create a more sustainable world.

9. How can businesses contribute to poverty alleviation through CSR?

Businesses can contribute to poverty alleviation through CSR by implementing initiatives that
focus on creating economic opportunities, improving access to education, and promoting social
inclusion in underserved communities. One way businesses can help is by providing fair wages,
job training, and career development opportunities to individuals in low-income areas,
empowering them to improve their livelihoods. Companies can also support small businesses
and local suppliers through ethical sourcing and fair trade practices, helping to strengthen local
economies. Additionally, businesses can invest in community development programs, such as
providing access to healthcare, clean water, or affordable housing, which can significantly
improve the quality of life for impoverished communities. By integrating these efforts into their
CSR strategies, businesses can play a key role in reducing poverty and fostering long-term
sustainable development.

10. Which of the following is an example of a CSR initiative?

b. Donating a portion of profits to charity
This is an example of a CSR initiative because it demonstrates a business's commitment to
giving back to the community and supporting social causes. CSR initiatives typically involve
positive actions that benefit society, the environment, and other stakeholders, such as
charitable donations, sustainable practices, and fair treatment of employees.

UNIT XIV: COOPERATIVE DEVELOPMENT AUTHORITY OF THE PHILIPPINES

1. When was the Cooperative Development Authority (CDA) established in the Philippines?
The Cooperative Development Authority (CDA) in the Philippines was established on March 10,
1990, through the Republic Act No. 6938. The CDA was created to promote and regulate the
growth and development of cooperatives in the country. Its main role is to provide the legal and
institutional framework for cooperatives, supporting their operations, ensuring compliance with
laws, and enhancing their impact on social and economic development.

2. What is the primary role of the Cooperative Development Authority (CDA)?

The primary role of the Cooperative Development Authority (CDA) is to promote the growth and
development of cooperatives in the Philippines by providing regulatory, policy, and technical
support. The CDA is responsible for registering cooperatives, ensuring they comply with the legal
framework, and offering guidance on cooperative management, operations, and sustainability. It
also assists in the capacity-building of cooperative members, advocates for the cooperative
sector, and facilitates access to resources, training, and financial services. By fulfilling these
responsibilities, the CDA helps strengthen the cooperative movement as a tool for social and
economic development, poverty reduction, and inclusive growth.
3. Who appoints the members of the Board of Administrators of the Cooperative Development
(CDA)?
The members of the Board of Administrators of the Cooperative Development Authority (CDA) in
the Philippines are appointed by the President of the Philippines. The board is composed of a
chairman and six other members who are appointed based on their expertise, experience, and
background in cooperatives or related fields. The appointments are made in accordance with the
guidelines set by the CDA and are aimed at ensuring effective governance and the promotion of
cooperative development in the country.

4. What is the required minimum number of members to form a cooperative under CDA
regulations?
Under the regulations of the Cooperative Development Authority (CDA) in the Philippines, the
required minimum number of members to form a cooperative is at least 15. These members
must come together with a shared goal of promoting their economic, social, and cultural well-
being. The CDA requires these founding members to draft and adopt a cooperative's articles of
incorporation and bylaws before registering the cooperative. The number of members may vary
depending on the type of cooperative, but 15 is the standard minimum for most types.

5. What is the maximum term of office for members of the Board of Administrators of the
Cooperative Development Authority (CDA)?
The maximum term of office for members of the Board of Administrators of the Cooperative
Development Authority (CDA) is two years. Members of the board may be reappointed for
another term, but their total time in office should not exceed two consecutive terms. This
ensures regular turnover and fresh perspectives while maintaining continuity in the governance
of the CDA. The board members are appointed by the President of the Philippines, as mentioned
earlier.