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BLOCK 4 WEEK 2
Income statement Understanding and calculations.
Most limited companies and larger professional partnerships produce, at least annually, three

financial statements that summarize and present financial information in a manner that has

become fairly standardized in the finance and accounting world. The three financial

statements generally produced are the following:

1. Balance sheet – sometimes known as the ‘statement of financial position’. A balance

sheet is a list of the financial resources (usually called ‘assets’) and the financial
obligations (‘liabilities’) of a business at a particular moment in time. It thus provides the
‘net worth’ of a business – the total value of the assets less the total of any liabilities.
2. Cash flow statement: Like the income statement, a cash flow statement covers a period of
time. It also, again like the income statement, acts as a bridge between two balance sheets.
While the income statement explains the increase (or decrease) in the net worth of a
business by showing how a profit (or loss) is generated from sales and costs, the cash flow
statement explains the change in cash resources of a business by showing how cash has
been generated and consumed under various headings.
3. Income statement – previously known in the UK as the ‘profit and loss account’, and
sometimes known elsewhere in the world as the ‘statement of financial performance’ or
‘statement of profit and loss’.

B ‫مبن دكان – مدخل‬ ‫ى‬

‫ – نفس ى‬13 ‫ – قسيمة‬9 ‫ – بناية‬6 ‫مستشف السيف – شارع العوازم – قطعه‬ ‫معهد وست فرجينيا السالمية خلف‬
67044422 :‫للتواصل‬ ‫ الدور االول‬.
The financial statements represent a snapshot of a business’s financial affairs. They are all

backward looking. The income statement and cash flow cover a period of time and the balance

sheet a specific moment in time.

➢ The income statement:

The income statement shows how the business has made a profit (or a loss) over a particular

financial period – usually a financial year, but it could just as readily refer to another period of

time like a month (and this would be common for management accounts). The statement

summarizes transactions relating to:

• income – different businesses may use different words – ‘sales’, ‘gross profit’, ‘revenue’,
‘fees’, ‘earnings.”
• expenses – (often called ‘costs’ or ‘overheads’) – a summarized list of the costs incurred
in order to generate the income.

A profit is generated if gross profit is higher than expenses, and a loss if the reverse. Accountants

will identify different levels of profit, the respective importance of which depending on the

specific sector in which they work and the particular needs of the business. These might include:

• trading or operating profit – the profit or loss arising from the trade or operations of the
business, without any allowance for the cost of financing the business (usually an interest
charge) or the impact of any taxation.
• profit before taxation (or profit after interest) – operating profit minus any interest charges,
but before (as the title suggests) any taxation charge.
• profit after taxation – presumably self-explanatory, the profit remaining after taxation has
been deducted.
B ‫مبن دكان – مدخل‬ ‫ى‬
‫ – نفس ى‬13 ‫ – قسيمة‬9 ‫ – بناية‬6 ‫مستشف السيف – شارع العوازم – قطعه‬ ‫معهد وست فرجينيا السالمية خلف‬
67044422 :‫للتواصل‬ ‫ الدور االول‬.
The income statement is only a summary of business performance over a period. On its own it is
unlikely to provide all the answers required – every answer to a question is likely to provoke a
demand for further, more detailed analysis before specific business responses can be identified.
And, sometimes, a change that appears to be for the worse in the short term (for example, a
significant investment in marketing expenditure) may in fact have been purposefully undertaken
for good business reasons that are intended to bring benefit in the long term

BLOCK 4 WEEK 3
Balance sheet Understanding and calculations.
Most limited companies and larger professional partnerships produce, at least annually, three

financial statements that summarize and present financial information in a manner that has

become fairly standardized in the finance and accounting world. The three financial

statements generally produced are the following:

1. Income statement – previously known in the UK as the ‘profit and loss account’, and
sometimes known elsewhere in the world as the ‘statement of financial performance’ or
‘statement of profit and loss’. The income statement covers a period of time (a month,
quarter or financial year). It shows the net profit/net income of a company during a
specific period of time.
2. Cash flow statement: Like the income statement, a cash flow statement covers a period of
time. It also, again like the income statement, acts as a bridge between two balance sheets.
While the income statement explains the increase (or decrease) in the net worth of a
business by showing how a profit (or loss) is generated from sales and costs, the cash flow
statement explains the change in cash resources of a business by showing how cash has
been generated and consumed under various headings.
3. Balance sheet – sometimes known as the ‘statement of financial position’. A balance
sheet is a list of the financial resources (usually called ‘assets’) and the financial

B ‫مبن دكان – مدخل‬ ‫ى‬

‫ – نفس ى‬13 ‫ – قسيمة‬9 ‫ – بناية‬6 ‫مستشف السيف – شارع العوازم – قطعه‬ ‫معهد وست فرجينيا السالمية خلف‬
67044422 :‫للتواصل‬ ‫ الدور االول‬.
 obligations (‘liabilities’) of a business at a particular moment in time. It thus provides the
‘net worth’ of a business – the total value of the assets less the total of any liabilities.
➢ The balance sheets
The balance sheet answers various questions about a business. What is it worth? Can the business

pay its bills? How will the owners benefit from any profits earned?

Failing to understand a balance sheet may lead to failing to keep control of cash resources – in

other words, finding it difficult to pay bills as they arise, or the wages of employees. In the worst

cases, a business can become insolvent – that is, incapable of paying bills that are now due – and

in that event the business is liable to be ‘wound up’ (i.e. its legal existence brought to an end after

an application to a court) and its assets sold off in favor of its creditors.

All of this sounds fairly mundane, but the balance sheet does much more for the business manager

than simply calculating the net worth of a business. It provides information on the state of the

business’s financial health – its ability to pay its liabilities as they fall due, and its resilience in the

face of substantial economic challenges or unexpected adverse events. The owners of a business

(and those that lend it money) will use its balance sheet to calculate the risk attached to their

investment, and the likely reward that will arise given any specific level of profit earned.

The balance sheet can be described as a ‘snapshot’ of a business’s financial affairs. Like a

snapshot, a balance sheet gives some information about what happened before the moment

captured but nothing about what happened subsequently, and that is a useful metaphor for the use

of a balance sheet in business. This is true of all financial statements; they are all backward

looking. While the income statement and cash flow cover a period of time and the balance sheet

covers a specific moment in time.

B ‫مبن دكان – مدخل‬ ‫ى‬

‫ – نفس ى‬13 ‫ – قسيمة‬9 ‫ – بناية‬6 ‫مستشف السيف – شارع العوازم – قطعه‬ ‫معهد وست فرجينيا السالمية خلف‬
67044422 :‫للتواصل‬ ‫ الدور االول‬.
 BLOCK 3 WEEK 4
Advantages and disadvantages of Business family vs going public.
Historical evidence on their relative performance has been mixed. The first of these, the
traditional family-owned firm, has sometimes been criticized as less likely to be outward
looking, innovative and entrepreneurial.

The other type of business, which has grown in importance over the last two centuries, operates

via stock market ownership, with professional managers running the day-to-day operations,

company directors providing oversight on behalf of the shareholders. In the late twentieth century,

the received wisdom was that US firms were quicker than British firms to separate ownership

from control; that is, to switch from family-controlled firms to firms run by professional

managers. Berle and Means’ (1968) argument, outlined in their famous book ‘The

Modern Corporation and Private Property”, was that professional management was better than

management by owner family members and that this, indeed, explained the relative failure of

British firms to flourish in the twentieth century in comparison with their counterparts in the

United States.

The lack of professionalism and enthusiasm of the second and third generations of firm founders

could, they argued, be behind a failure to innovate, with managers preferring to take dividends out

of the firm in the short term, rather than using the money to invest for the long term.

This argument, until recently unchallenged, suggested that family ownership was a recipe for

disaster – certainly in the longer term, regardless of the size of the firm.

B ‫مبن دكان – مدخل‬ ‫ى‬

‫ – نفس ى‬13 ‫ – قسيمة‬9 ‫ – بناية‬6 ‫مستشف السيف – شارع العوازم – قطعه‬ ‫معهد وست فرجينيا السالمية خلف‬
67044422 :‫للتواصل‬ ‫ الدور االول‬.
 Family firms vs. corporations
However, was this true for Britain? Were British firms more family-oriented than comparable US

firms? After the limited liability acts of the 1850s, firm incorporation took off with thousands of

new companies in existing and new industries flooding the stock market. By 1900, the London

Stock Exchange was the largest stock market in the world. So, how does this compute with an

image of inward-looking family firms when companies could not be listed on the stock exchange

without two thirds of the share capital being in the hands of outside – not family – investors?

The business historian Les Hannah (2007) has argued that Berle and Means were simply wrong.

He says that board ownership in the average British company was as low as 13% by 1900, a

figure not achieved by the Americans till 30 years later. And he cites numbers of shareholders in

major British companies to support his case. By 1902, there were four major banks with over

5,000 shareholders each, rising to more than 15,000 each by 1915. Rutterford (2016) points out

that Lipton’s tea company, listed in 1888, announced at its first annual general meeting that it had

74,000 shareholders. And railway companies, the dominant sector in 1900, had tens of thousands

of shareholders.

But it isn’t as clear cut as all that. Many small companies, which thrived as private firms but then

chose to raise some capital by floating on the stock exchange, could get around the two-thirds

share capital rule quite easily. They could either issue types of securities which had limited voting

powers (such as debentures or preference shares) or issue themselves with special shares

which had increased voting rights (such as founders’ shares or ‘A’ shares) (Cheffins et al., 2012).

Brewery companies were particularly good at this kind of thing, with brewery debentures as

B ‫مبن دكان – مدخل‬ ‫ى‬

‫ – نفس ى‬13 ‫ – قسيمة‬9 ‫ – بناية‬6 ‫مستشف السيف – شارع العوازم – قطعه‬ ‫معهد وست فرجينيا السالمية خلف‬
67044422 :‫للتواصل‬ ‫ الدور االول‬.
popular as government bonds in the 1890s – despite having no voting rights. Companies such as

Marks and Spencer and Rank Organization had non-voting shares well into the twentieth century.

And the Savoy Hotel fought off bids by Trust House Forte (THF) in the 1980s by issuing lots of

voting shares to the family owners. Despite holding a majority of shares, THF could not get a

majority of voting shares.

But most family firms, including Marks and Spencer, eventually diluted control as they equalized

share voting rights and returned time and again to the stock market for new injections of capital.

Family members often don’t have the funds to take up rights issue after rights issue.

BLOCK 4 WEEK 1:
Entrepreneurial marketing.
The majority of marketing theory and practice has been developed in the context of large

businesses. This can be referred to as corporate traditional Marketing (CTM) or administrative

marketing (AM). Entrepreneurial marketing (EM) is used to describe the marketing undertaken by

small entrepreneurial ventures, often at start-up or early growth phase. It should be noted that

entrepreneurial approaches to marketing are not the sole preserve of small firms, and the term can

be applied to larger or established firms that adopt innovative marketing approaches. However, as

firms grow and mature their approach to marketing tends to become highly structured and

routinized and less innovative.

B ‫مبن دكان – مدخل‬ ‫ى‬

‫ – نفس ى‬13 ‫ – قسيمة‬9 ‫ – بناية‬6 ‫مستشف السيف – شارع العوازم – قطعه‬ ‫معهد وست فرجينيا السالمية خلف‬
67044422 :‫للتواصل‬ ‫ الدور االول‬.
Although difficult to characterize precisely, entrepreneurial marketing has been described as

informal, dynamic, responsive to customer needs and often simple in its design and execution.

Marketing is often undertaken by the owner of the business, who is likely to be a generalist, rather

than a marketing expert and will typically be undertaken part-time alongside other activities.

These features suggest a more seamless and integrated approach to marketing in small ventures

than is often evident in administrative marketing.

Marketing in small firms is often assessed in the context of larger firms, and has been judged

reactive, short-term and non-strategic. Similarly, small firms are often considered to be unaware

of market trends as they do not undertake formal market research. However, it is the lack of long-

term and fixed plans that allows entrepreneurial marketing to be responsive and flexible.

Relationship with customers

One key characteristic of entrepreneurial marketing is that the entrepreneur or the entrepreneurial
team are often very close to their customers, interacting with them directly. They are therefore able
to understand customer needs and, given the increased flexibility associated with small businesses
can often respond rapidly to these needs. It is this closeness to the customer that prevents the need
for formal market research.
Larger firms are often more distant from their customers and staff interacting with customers are

distinct from those developing or making products or services. A key process for interacting with

customers or other stakeholders is networking. Hence networking has been identified as a key

process in entrepreneurial marketing.

Access to resources’
Whilst access to resources is important for all types of marketing, entrepreneurial marketing in

particular is seen as ‘based on the resources available at the moment’. The acquisition of certain

B ‫مبن دكان – مدخل‬ ‫ى‬

‫ – نفس ى‬13 ‫ – قسيمة‬9 ‫ – بناية‬6 ‫مستشف السيف – شارع العوازم – قطعه‬ ‫معهد وست فرجينيا السالمية خلف‬
67044422 :‫للتواصل‬ ‫ الدور االول‬.
resources may be difficult. Entrepreneurs will shape their marketing strategies according to the

resources they have at hand or can readily acquire, rather than base their business and marketing

strategy solely on customer needs. Similar to administrative marketing, entrepreneurial marketing

also seeks to meet the desires, needs and motives of both the entrepreneur as well as the customer.

The starting place for an entrepreneurial firm and therefore entrepreneurial marketing activity is

and must be the entrepreneur’.

.... ‫اذكروني بدعوة‬

B ‫مبن دكان – مدخل‬ ‫ى‬

‫ – نفس ى‬13 ‫ – قسيمة‬9 ‫ – بناية‬6 ‫مستشف السيف – شارع العوازم – قطعه‬ ‫معهد وست فرجينيا السالمية خلف‬
67044422 :‫للتواصل‬ ‫ الدور االول‬.