ENTREPRENEURSHIP NOTES 1

ENTREPRENEURSHIP
MIDTERMS
WEEK 1
 Entrepreneurship
o Proactive Process of developing a business venture.
o Capacity and willingness to develop, organize, and manage a business.
o Art of observing correct practices in managing and operating a self-
owned business.
o Aimed to gear someone towards self-employment.
o Engaging in small and medium-sized businesses.
o An entrepreneur has more bosses.
 Social and Economic Benefits of Entrepreneurship
o Produces more jobs.
o Amplifies economic activity.
o Introduces new innovations.
o Improves people’s living standards.
o Disperses economic power.
o Controls local wealth.
o Reduces social conflicts.
o Elicits economic independence.
 Entrepreneur
o French word “Entreprendre” meaning to undertake.
 Entre means “Between”.
 Prendre means “to take”.
o Has dedication to establish and manage a business knowing all the risk
and reaping its rewards.
o Organizes, operates, and assumes the risks.
o Strongly advocates and correctly practices the concepts and principles of
entrepreneurship.
o Entrepreneur vs Manager
Entrepreneur Manager
Future Oriented Now Oriented
Thrives on Chaos Thrives on Structure
Personally Responsible Merely Responsible
Achieve Attaining Targets
Creator Custodian
Risk Taker Seeks Stability
 Levels of entrepreneurial development
o Self Employed
 Not comfortable with the routines
 Do not want to conform to a fixed working schedule.
2 GENERAL MATHEMATICS NOTES

o Manager
 Stepping up and asking help from people.
 Delegate and hire employees.
o Leader
 Enjoy seeing their people flourish, stepping up and producing
great results.
o Investor
 Look for more opportunities for the business to grow.
o True Entrepreneur
 Aims for quality and excellence in their work.
 Fully learned.
 4-Step Process of Thinking
o Idealization
o Visualization
o Verbalization
o Materialization
 New Terms on Entrepreneurs’ Field
o Technopreneur
 Technology
o Social Entrepreneur
 Takes advantage of social problems to turn into institutions.
o Intrapreneur
 Entrepreneurs hired by companies such as product managers or
business development managers,
o Extrapreneur
 Hops from one company to another to act as innovation
champion.
 Provides creative solutions.
 Common Entrepreneurial Competencies
o Proactive
o Agents of Change
o Risk-Takers
o Sharp Eye for Opportunity
o Sociable
o Networkers
o Decisive
o Balanced
o Innovative
 Core Entrepreneurial Competencies
o Leaders
o Communicators
o Specialists
o Problem Solvers
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 Career Opportunities
o Handmade Products
o Commercial Cleaning Service
o Pet Products
o Etc.
WEEK 2
 Entrepreneurial Process
o Step by Step procedure in establishing any kind of business that an
entrepreneur has to undergo.
o 4 Aspects
 Opportunity spotting and assessment
 Developing a business plan
 Determining the capital needed
 Running the business
o Scanning the Marketing Environment
 Starting point of any new venture that involves understanding and
knowing the intricacies of the environment.
 Recognize various opportunities and understand the arena where
the future business will operate.
 Find opportunity first before coming up with a new product or
service.
 3S (Seeking, Screening, Seizing) of Opportunity Spotting and Assessment
o S1 - Seeking Opportunity
 Business idea that can become a commercial product or service.
 First step and the most difficult
 Essentials
 Heart Flame
o Emotional Intelligence manifested to nurture
relationships.
o Looking after interest of people by motivating and
encouraging them to be the best.
 Mind Frame
o Allows entrepreneurs to see things in a positive
and optimistic light amidst crises.
o In China the word crisis is composed of two
characters, one meaning danger and one meaning
opportunity.
 Gut game
o Ability to sense without using the 5 senses.
o Intuition
 Sources of Opportunities
o The Macro-Environment
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 To uncover or discover opportunities, some have to look at the big

picture and check trends and patterns.
 Demographic
 Population, Age, Gender, etc.
 Economic
 Tax, Interest Rate, Inflation, etc.
 Natural
 Physical Environment, Natural resources, Weather, etc.
 Technological
 Antibiotics, Robotics Surgery, Smartphones, etc.
 Political - Social
 Laws, Government Agencies, Pressure Groups, etc.
 Cultural
 Beliefs, Values, Perceptions, etc.
o Sociocultural Factors
 Represent the general view of a locality’s traditions, customs,
beliefs, norms, and perception.
o Technological Factors
 Innovations of an existing technology
o Economic Factors
 Income, expenses, and resources directly affect business.
o Environmental
 Given premium not only to generate profits but also to save the
planet.
o Political factors
 Made by government policies and administration.
o Legal factors
 Laws and regulations that can restrict or allow business activities.
o Ethical Factor
 Guide in morally running the business
o Demographic Factors
 Population, age, gender, etc.
o Industry
 Source of current trend on what is happening in the industry.
o New Knowledge
 Trends that can be the core business model.
o Futuristic Opportunities
 New opportunities that can affect the new business while it is
running.
o Micromarket
 Specific target market segment.
o Consumer Preference, Interest, and Perception
 Needs
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 Basic reasons/minimum requirements consumer look for

in a product.
 Wants
 Specific Manifestations of needs.
 Demands
 Wants backed by purchasing power.
o Competitors
 Another source of opportunity
 Innovate existing products and competitively position after.
o Unexpected opportunities
 Using creative thinking
o Entrepreneurs’ Talents, Hobbies, Skills, and Expertise
 Opportunities may also come from these.
o Problem
 Opportunities can arise in problems in the world.
 Methods of Generating Ideas
o Focused Group Discussion
 Mining customer and Noncustomer experience and insights
 Participants talk about the product/service and provide
suggestions and comments to improve.
o Brainstorming
 Share creative ideas with the rules:
 No destructive criticism.
 More ideas are preferred.
 Improvement of others’ ideas is allowed.
o Brainwriting or Internet Brainstorming
 Brainstorming but online
 Longer time needed
o Problem Inventory Analysis
 Same with FGD but participants are already given the product or
service problems.
 Recognizing existing challenges rather than generating other
ideas.
WEEK 3
 S2 - Opportunity Screening
o Cautiously selecting the best opportunity based on internal and external
intent.
 Internal Intent
 Business will accomplish in the entrepreneur’s life.
 External Intent
 How the business addresses the needs of the market.
 Dure diligence and independent judgement in selecting
opportunities that are in the scope of risk appetite.
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o Entrepreneur’s tolerance of business risks

o Either risk taker or risk adverse
 Time
 Must be devoted to worthwhile opportunities by the
entrepreneur.
 Business Opportunity Elements
o An opportunity should be turned down if it doesn’t contain any of these.
 Superior Value to Customers
 Beneficial to the target market
 Solves a Compelling Problem
 Satisfaction of external intent.
 Potential Cash Cow
 Matches with the Entrepreneur’s Skills, Resource, and Appetite
 Vision Statement
o “Where will the business be?”
 Mission Statement
o “What is our business and why do we exist?”
 In S2, opportunity metrics are critical success factors.
o Market Potential
 Favorable number of possible customers.
 Will it increase?
o Financial Feasibility
 Will it provide Profit?
o Management Team
 Are the employees dedicated enough?
 Highly skilled team
o Personal Resources
 Evaluate yourself
 Do you have the drive?
o S2 – Seizing Opportunity
 Innovation
 Process of positively improving an existing product or
service.
 Richard Branson “Business opportunities are like buses,
there’s always another one coming.
 Types
o Breakthrough
- Inventions that occur rarely as they
establish the platform on which future
innovations are developed.
- E.g. Internet, Computer, Airplane
o Technological
- More frequently
 ENTREPRENEURSHIP NOTES 7

- Advancements of an existing product

- E.g. WiFi, Laptop, Jetplane
o Ordinary
- Ordinarily
- Meal twists
- E.g. Telco Providers changing promos.
 Calls for refining and developing the opportunity.
 Called Product or service planning and development
process.
o Idea Stage
- Determination of feasible products that
perfectly suits an opportunity.
- Market evaluation is done.
o Concept Stage
- Consumer acceptance.
- Initial reactions of primary target market.
- Conversational interviews are conducted.
o Product Development
- Leveraging on the information from the
customer review.
- Actual reactions from customers
- Paneling of reviews.
o Test Marketing Stage
- Validates the work done from first three
stages to measure success.
- Check if customers accept the product
o Commercialization
WEEK 2
 Business Plan
o Comprehensive paper that outlines the basic concept underlying a
business and describes how the concept will be realized and what
problems will be solved.
o Layout basic idea of the business.
o Blueprint to keep the entrepreneur on track.
o Value Proposition
 Why a customer should by a certain product or avail a service.
 Needs to be direct
FINALS
WEEK 1 and 2
 Fundamentals of Product Development
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o Before commercializing a new product or service, the entrepreneur must

focus first on refining the product or service and validate its market
acceptability.
o Innovated product.
o New product line from the existing business of the entrepreneur.
o Product line extension.
o Enhancement product.
o Repositioning of an existing product.
o Product Development
 Creation of a new or different product that offers new benefits to
the customers.
 Composed of four steps:
 Developing a Product or Service Description
o How a product or service works and how it
benefits the customers.
o In consumer goods, the description is usually at the
back of the packaging.
o A way to know if a product of service is superior.
o Should directly address the primary target market
in a personal manner using every day language.
o Should highlight features that will cater to the
customer’s needs or problems.
o Realistic superlatives should be used.
o Use appropriate adjectives to describe.
 Creating a Prototype
o Preliminary model or sample of a new product or
service that is created to test a product concept or
service process.
o Early sample, model, or release of a product built
to test a concept or process.
o Inventing process is possibly the period of greatest
learning.
o The entrepreneur can experiment, develop, and
make improvements in the potential product or
service.
o For goods, the entrepreneur will decide as to the
number and type of materials to be used in coming
up with the product ranging from metals to
plastics, to chemicals, to textiles.
o The entrepreneur will also scrutinize the parts and
functions as well as the design etc.
 ENTREPRENEURSHIP NOTES 9

o In services, the entrepreneur will take note

strengths and weaknesses of the said service to
come up with an acceptable standard service.
o Advantages
- Enables the entrepreneur to engage in trial-
and-error.
- Provides room for improvements.
- Refines functionality of product or service.
- Provides window to test the performance
and specifications of various materials and
service processes.
- Helps an entrepreneur effectively describe
the product or service to the product team.
- Elicits respect from stakeholders and
customers.
- Gives credibility to the entrepreneur.
 Testing the prototype
o Process before an actual product or service is
launched in the market.
o Uncovers the final loopholes that need to be
addressed before commercialization.
o Methods
- Focus Group Discussion
 Focuses on identifying errors,
deficiencies, and issues that may
impede the success of the product
or service.
 Entrepreneur must elicit the
participants’ suggestions and
practical solutions to these
problems.
- Safety Test
 Ascertains that the product is safe to
use, safe to be consumed, and safe
to be applied.
- Product Costing Test
 Examining the expected cost versus
the allocated budget in every stage
of the production process.
- Component Test
 Each component is tested
independently to identify each
component’s failures.
 Systematic and organized.
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- Competitors’ Product or service Test

 Testing a similar line of products
from competitors to compare and
get practices to be applied to new
service.
o Methods
- Testing of the prototype is mandatory to
ensure that the product will not fail the
customer.
 Validating the market\
o Finding out if the intended primary target market
will be buying the good or availing the service.
o Validates or invalidates the entrepreneur’s
perception about the suitability or appropriateness
of the chosen primary target market.
o Deeply understand the value that the product or
service brings to the customer and their
prospective purchase behavior.
o Last step before the product or service can be
introduced to the market.
o Likely to answer:
- Will the primary target like the product or
service?
- Will primary target buy the product or
service when it is already in the market?
o Can be answered easily by the target market
segment by:
- Using the most strategic marketing
research tool.
- Decide whether to apply FGD, survey,
interview, observation, online survey, etc.
o Prepare relevant and concise questions.
o Don’t go around the bush.
o Include necessary questions only that will give you
definite answers for the questions stated earlier.
o Consult the experts.
o Consider tapping the knowledge of market experts
who can provide you meaningful information for
you to enhance your good or service.
o Collect all the data, analyze, and prepare a
summative report that answers the questions.
o Product or Service Description
 4 M’s of Operations
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o Every Profit or service organization pays attention to many factors such

as:
 Aspiring entrepreneurs must possess the skills, patience, and
passion for the business, as well as the courage to face reasonable
risks.
 Each employee must be qualified to perform his or her job.
 Proper machines and equipment should be installed to facilitate
operations.
 Raw materials should be readily available.
 The methods or technology used by the organization must give it
a competitive edge over the others.
o Operations Plan
 Important part of the business plan.
 Provides the details in operating the business.
 Should have 4 M’s of operations:
 Methods
o Process to be followed in effectively
manufacturing or delivering a product or service.
o Day-today operations of a business.
o Step-by-step process in the business.
o Without this, it would be difficult to stabilize or
expand the business.
o Must also abide with industry standards and
policies where the business belongs.
o Entrepreneurs must also set standard operating
procedures both in manufacturing goods and
rendering of services.
o Describes how an entrepreneur runs and manages
the business from all facets of the business such as
the
- manufacturing of goods, and services.
 The entrepreneur who will engage
in producing his or her own
products will have to consider the
basic guidelines and principles in
manufacturing.
o Process of translating raw
materials into finished
goods that are acceptable to
customer’s standards.
o Consists of 3 elements:
 Inputs
 Process
 Output
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 Also consider the most efficient

manufacturing site in which the
manufacturing process will take
place.
 Depending on the objective and
financial capacity, an entrepreneur
can opt to have any of the following
sites:
o Home-Based
 Cheapest and Highly
Flexible
o Commercial space for rent
 If business really
requires a
commercial space
for the processing of
goods and if the
home is not viable
anymore.
 Gives entrepreneur a
more specialized and
suited site.
o Commercial space
purchase
 Requires biggest
amount of capital
expenditure.
 Provides
entrepreneur
substantial freedom
and flexibility to
design and run the
commercial space.
 Considered more of
an investment than
expense.
- Service delivery processes.
 Service business must be more
meticulous in this method since the
only way the customer can
appreciate the service is by
remembering how pleasant his or
her experience was.
 ENTREPRENEURSHIP NOTES 13

 Service entrepreneurs must prepare

a detailed flowchart of the service
business.
o Also called service
blueprint.
o Every process in this must
be relevant to the service
business to minimize
wastage.
 Service bottlenecks must be
addressed immediately to avoid
customer complaints.
o Part of the process where
there is an apparent
inefficiency and where the
customer waits longer.
 The service entrepreneur must
develop scripts that the service
provider will follow to establish
standard process.
 In terms of the floor plan, the
service entrepreneur must design it
according to the most efficient way
in performing the service, which
can be based on the internal
structure of the service business,
service delivery requirements, or
customer requirements.
- Distribution of goods and services
 Process of bringing the products or
services to customers
 In selling physical goods, the
entrepreneur must plan the location,
the process, and the distribution of
the products to the customers.
 The entrepreneur may also buy the
finished goods from the
manufacturers and plan how to
distribute them efficiently to target
distribution centers or the
customers.
 Not a straight process rom
entrepreneur to customers; thus, the
14 GENERAL MATHEMATICS NOTES

term supply chain or distribution

channel was coined.
 The manufacturer will deliver the
products to the distributors,
wholesalers, retailers, then finally,
the customers.
 According to Will Kenton
o A supply chain is a network
between a company and its
suppliers to produce and
distribute a specific product
to the final buyer. This
network includes different
activities, people, entities,
information, and resources.
The supply chain represents
the steps it takes to get the
product or service from its
original state to the
customer.
 The entities involved in the
supply chain include:
o Manufacturer
 Handles the
invention
development and
production of the
product or service.
 Take charge of
acquiring materials,
production and
delivery schedules,
product quality, and
inventory or safety
management.
 Handles the product
delivery, marketing,
and selling.
o Distributor
 Entrepreneurs who
often buy products
or services from the
manufacturers and
sell them at a
 ENTREPRENEURSHIP NOTES 15

marked-up price to
either wholesalers or
retailers.
 Buy the products in
bulk for a discounted
price.
 Become wholesalers
when they sell to
another distributor.
o Agents
 Don’t own the
product because they
do not buy from the
manufacturer.
 They negotiate with
buyers as to how
much or how many
are to be sold, so the
manufacturer will be
able to deliver the
goods directly to the
buyer.
 Gets commission.
 Some do
consignment,
wherein agents get
the product in
advance to
demonstrate them
live to customers. If
unsold, agents just
return the merch to
manufacturers.
- Payment Process
 Entrepreneur must ensure that credit
payments are seamless and that the
customers are aware of the terms
and conditions of the credit.
 Some put point-of-sale machines in
their shops to accommodate those
who will pay through their credit or
debit cards.
16 GENERAL MATHEMATICS NOTES

 For traditional ones, the credit

purchase is put in a ledger with due
dates.
 The main objective is to ensure
efficient collection of accounts
receivables and avoid bad debts.
- Logistics for delivery of goods
- Inventory management
 Manpower
o Right human resources who will handle certain
business operations.
o Total number of individuals employed in a
company or available for a particular project
assignment or work.
o At the beginning of the business, the entrepreneur
uses himself or herself, his or her partner, or his or
her family to handle all the aspects of the business.
o As the business grows, the entrepreneur will need
the expertise of qualified employees that can
handle operational functions.
o Staff plays a pivotal role in any business venture.
o Reasons why manpower is significant:
- Accountability
- Customer Relations and Financial Growth
- Operation and Innovation
- Health and Safety
- Productivity
o Job Analysis
- Primary tool to collect job-related data
- Helps both employer/entrepreneur and
employee understand what needs to be
delivered and how.
- Job Description
 Duties and Responsibilities of the
potential employee.
 Includes the scope, limitations, and
terms and conditions of
employment.
 Determines what needs to be
delivered in a job.
 Clarified what employees are
supposed to do if selected for that
particular job opportunity.
 ENTREPRENEURSHIP NOTES 17

Includes:
o Title
o Compensation and benefits
o Duties
o Reporting to
o Working Conditions
o Job Duties
o Machines to be Used
o Hazard
- Job Specification
 Written statement of educational
qualifications, specific qualities,
level of experience, etc. required to
perform a job.
 Helps candidates analyze whether
they are eligible to apply for a
particular job vacancy or not.
 Helps recruiting team of an
organization understand what level
of qualifications should be present
in a candidate to make him or her
eligible for the job.
 Helps in selecting the most
appropriate candidate.
 Includes:
o Qualifications
o Experience
o Training
o Skills
o Responsibilities
o Emotional Characteristics
o Sensory Demands
o Preparatory Selection of Job Applicants
- Headhunters
 Help the companies find a set of
people suited for their requirements.
 Charge a finder’s fee once the
entrepreneur has decided to accept
the applicant.
- Print Advertisement
 May be in a form of general
circulation newspapers or other
publication if the intention is to
18 GENERAL MATHEMATICS NOTES

promptly get a candidate from the

public.
 If the intention is to hire candidates
with specific knowledge or skills,
the entrepreneur must turn to
magazines of specific industry
where the prospect belongs.
- Business Networks
 People whom the entrepreneur
worked with in the past.
- Manpower Agencies
 Recruit temporary employees under
a short contract, usually on a six-
month period.
- Recommendations and Referrals
 Consider recommendations and
referrals from friends, relatives, or
business partners with an unstained
reputation.
- Digital Media
 With the power of the internet, the
entrepreneur can easily post job
vacancies through their site, social
media accounts, emails, etc.
o Selection of Job Applicants
- Once the potential candidates are pooled,
the entrepreneur must screen them and pick
the most qualified and most suited for the
job.
- Preliminary Screening
 Can be done easily because the
entrepreneur will just need to refer
to the required qualifications and
eliminate those who did not qualify.
- The entrepreneur or the HR department can
now conduct a series of interviews for the
shortlisted candidates with the objective of
getting the most qualified candidate.
o Job Offer
- Also called Job Contract
- Prepared once the entrepreneur or the
hiring manager has been convinced already
of the credentials and the interview answers
of the candidate.
 ENTREPRENEURSHIP NOTES 19

- Summarizes the terms and conditions of the

candidate’s employment with the business.
- Includes:
 Rank or position of candidate.
 List of responsibilities or
deliverables and its scope.
 Salary benefits including vacation
and sick leaves.
 Work schedule.
 Probationary period.
 Duration of the Contract.
 Resignation Procedure.
o Employee Orientation
- Training starts with this
o On-the-Job Training
- Most practical tool in training the employee
under a supervision of a team leader or
manager
o Buddy System
- An expert member is assigned to assist new
employee in his/her function.
o Mentor-Mentee Program
- Supervisors will be mentored by a senior
executive or senior officer of the business.
o Online Learning Programs or Webinars
- Practical, flexible , and convenient way
of learning.
o Talent Management Strategies
- Competitive salary package, nonmonetary
benefits, and additional benefits.
- Entrepreneurs must be able to be objective
when evaluating the performance of
employees.
 Machine
o Technology used in efficiently operating the
business.
o Considered as best friends of man power in
producing goods and offering services
o Has become a very important aspect of goods and
service production and has changed the way
entrepreneurs conduct business.
20 GENERAL MATHEMATICS NOTES

o Entrepreneur must ensure that employees went

through rigorous training or certification to operate
them.
o The entrepreneur must also allocate space for the
storage of equipment, including the parking of
delivery vehicles.
o Telecommunications and Information Technology
- Landline Phones
 Order-taking, telemarketing,
teleconferencing.
- Mobile Phones
 Mobile applications, mobile
marketing, social media marketing.
- Laptop and Desktop Computers
 Marketing research, preparing
reports.
- POS Machines
 Charging customers’ debit or credit
card, tracking sales.
- Accounting Inventory Software
 Monitoring sales and inventory.
- Web Site
 Having online conversations with
customers, 24/7 marketing.
 Material
o Used in creating a product or performing a service,
which includes supply chain management.
o Raw Materials
- Used in primary production or
manufacturing of goods.
o Entrepreneurs must decide what route to choose
when it comes to materials requisitioning such as:
- Manufacturing own products/services
- Outsourcing of manufacturing or service
activities to a third party
 Process of appointing a third-party
manufacturer to do the
manufacturing operations of the
business.
- Purchasing own product or services from
present suppliers.
- For logistics:
 Warehousing
 ENTREPRENEURSHIP NOTES 21

 Transportation
 Inventory
 The 4 M’s are applicable to business opportunities since business
is in essence tied to manufacturing as well.
o Operations Management
 Controls the implementation of the business plan.

WEEK 3
 The Business Model
o According to Debelak
 Entrepreneurs must apply the dynamics of the traffic lights in
developing business models.
o Green Flags:
 Target high-value customers
 Easy to locate.
 Allow you to charge a profitable price.
 Willing to try your product after minimal marketing
expense.
 Can generate enough business to meet your sales and
profit objectives.
 Offer products or services with great value.
 Offer products or services with reasonable price.
o Red Flags:
 Satisfying the customers becomes too costly and irrational.
 High warranty costs
 Extensive technical support
 Extensive installation requirements
 Extensive Customer Care
 Being a market leader is difficult to sustain.
 Return on investment takes too long and too small.
 Financial Plan
o When an entrepreneur begins to raise funs for his or her company,
financial management begins.
o Capital
 Money that is allocated by the entrepreneur to establish a
business.
 Shouldn’t be mixed with the personal money of the entrepreneur.
o Collateral
 High asset that is submitted by the business to the bank applying
for a loan and will be subject for repossession if the business
defaults.
o Revenue
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 Output of sale wherein the sales price exceeds the cost to produce
the product or render the service.
o Earned Revenue
 When the product is already sold, or service has been rendered
regardless of if the business is paid in cash or credit.
o Unearned Revenue
 Prepaid revenue
 Paid to a business in advance before it provides goods or services
to a client.
 Factors Affecting the Estimation of Revenue
o Economy and External Primary Target Market
 The Philippine economy is growing but the target of an
entrepreneur is still in class D. The entrepreneur must be able to
reconcile and come up with realistic estimates.
o External competitors
 Direct competitors
 Offer the same product or product lines or services as the
entrepreneur.
 Indirect competitors
 Do not offer exactly the same products but influence or
affect the entrepreneur’s market share.
 The challenge for the entrepreneur is to come up with a
highly differentiated product or service with a very strong
unique selling proposition.
o Internal Business
 The entrepreneur must also devise his or her own marketing
strategies based on external and internal scan and from the
competitive profile matrix.
 With the data, the entrepreneur can craft strategies that can
outweigh those of the competitors.
 Financial Plan
o Record that provides an indication of the organization’s status.
o Helps in the evaluation of the company’s prospects and risks for the
purpose of making business decisions.
o The figures displays is the basis of the entrepreneur’s decisions on
financial matters such as offering credit terms to customers, applying for
a bank loan, expanding, or selling the business.
o Types:
 Statement of Financial Position (Balance Sheet)
 Core financial statement.
 Describes the financial position of the company
 Reports the assets, liabilities, and capital of the business.
 Composed of 3 elements:
 ENTREPRENEURSHIP NOTES 23

o Assets
- Represent the resources of the business that
are expected to have future economic
value.
- Current assets
 Mostly liquid assets that can be
exchanged to cash within one year.
- Noncurrent assets
 Long-term assets that can be
converted to cash for more than one
year.
 Accounts Receivable
o Any amount of money owed
or not yet paid by
customers.
 Inventory
o Goods available for sale or
raw materials used to
produce goods available for
sale.
 Equipment and Fixture
o Include machines, furniture,
and fixtures that are
expected to be used for
more than a year.
o Subject to Depreciation.
 Value reduction of
the noncurrent asset
primarily due to
natural wear and tear
and other value-
reducing factors.
 Recorded in the
balance sheet as a
deduction to the fair
market value of the
property, plant and
equipment.
o Liability
- What the business owes to another person,
a financial institution, or any creditor.
- Current Liabilities
 Short term Liabilities
 Due for one year or less
24 GENERAL MATHEMATICS NOTES

 Accounts Payable
o Represents a company’s
obligation to pay off a short-
term debt to its creditors or
suppliers.
 Utilities Payable
o Amounts owed to utility
companies for electricity,
gas, water, phone as of the
date of the balance sheet.
o Instead of using separate
account for utilities payable,
the amounts owed are
included in accounts
payable.
- Noncurrent Liabilities
 Long term Liabilities
 Dure more than one year in the
future
o Equity or Capital
- Funds allocated by the entrepreneur to run
the business.
- An increase in the owner’s equity is sign of
a good business health
- Shows that the company is relying less on
debt to fund its operation
- In the balance sheet, the total assets must
always be balanced or of the same amount
with the total liabilities and capital.
- Assets = Liabilities + Owner’s Equity
 Statement of Comprehensive Income (Income Statement)
 Reports on company’s income, expenses, and profit or loss
over a period of time.
 Key Components:
o Sales
- Also called revenue.
- Money Earned from a company’s normal
business operations.
o Expenses
- Cost associated with earning the sales or
revenue.
- Common Business startup cost
 Registration Fee paid to city hall
 ENTREPRENEURSHIP NOTES 25

 Business name registration with

DTI
 Accountant or lawyer fee for
business
 Cost of Machine or Equipment
- Cost of Goods sold
 Also referred to as cost of sales
 Cost directly related to the
production of goods sold by an
entity
 All raw materials directly used in
production will fall under this
COGS.
 COGS does not include sales and
marketing.
- Gross Profit
 Profit a company makes after
deducting the cost directly
associated in the production of
goods from the sales.
- Operating Expense
 Expense business incurs through
normal business operations.
- Other Expense
 Include administrative expense,
salaries, utilities, tax.
- Net Income
 When all expenses have been
deducted from the gross revenue.
 Statement of Changes in Equity
 Statement of Cash Flows.
 Movement of money into and out of a company
 Represents inflow and outflow of cash and cash
equivalents like checks, bank deposits, etc.
 Important financial metric to assess a company’s liquidity,
financial health, and ability to meet short-term and long-
term financial obligations.
 Operating Cash Flow
o Generated from core business activities.
 Investing Cash Flow
o Cash related to investment in assets.
 Financing cash flow
26 GENERAL MATHEMATICS NOTES

o Used for financing activities like loans and equity

transactions.
 A cash flow statement show how changes in balance sheet
accounts and income affect cash and cash equivalents and
breaks the analysis down to operating, investing, and
financing activities.
 Provides information about the cash receipts and cash
payments.
 Shows the net increase or decrease in cash during the
period and cash balance at the end of the period.
 Positive Cash flow
o Sales revenues, fees, interest income, and
dividends from investments and loans
 Negative Cash flow
o Operational expense, investment, machine
purchases, and payment to creditors and suppliers.