Analyzing a Business Scenario

Student Guide

Assignment Summary
For this assignment, you will analyze a scenario related to running a business. You will review the
scenario on your own, then work with a group to answer questions about it.

Background Information
Analyzing business scenarios can help you better understand the practical applications of economic ideas
and theories. For this project, you will participate in a group discussion to analyze a scenario and respond
to questions.

Assignment Instructions
For this project, you are expected to submit a completed form of the “Analyze a Business Scenario”
worksheet.

Step 1: Read each section of the scenario on your own.

a) If you have questions about how to complete this assignment, ask your teacher for
assistance.
b) If you need help understanding any of the terms or equations used in the scenarios and
questions, ask your teacher for assistance.

Step 2: Participate in a group discussion to answer the questions in each section.

a) Meet with your assigned group to discuss the questions for each scenario.
b) Remember to take notes and follow the rules for group discussions.
c) Use your notes from the discussion to answer the questions.

Step 3: Use this checklist to evaluate your project.

If you can check each box below, you are ready to submit your project.

• Did you read each scenario carefully?

• Did you participate in the group discussion?
• Did you take notes during the discussion?
• Did you support your ideas with facts and details from the scenarios?
• Did you use your notes from the discussion to answer the questions?
• Is your worksheet free of errors in spelling and grammar?

Step 4: Revise and submit your project.

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 Student Guide (continued)

a) If you were unable to check off all of the requirements on the checklist, go back, and make
sure that your project is complete. Save your project before submitting it.
b) Turn in the worksheet to your teacher. Be sure that your name is on the submission.
c) Submit the worksheet through the Virtual Classroom.
d) Congratulations! You have completed your project.

ANALYZE A BUSINESS SCENARIO

Read the following scenarios related to running a business, then work with your group to respond to the
questions. As you share ideas, remember to follow the rules for group discussions:

● Take notes.

● Be courteous.

● Listen carefully to one another.

● Speak one at a time without interrupting.

● Support your statements with facts and details.

Finally, use the discussion and your notes to answer the questions.

Section 1: Analyzing a Balance Sheet

Omar and Janet own a small jewelry-supply business called Rings and Things. From January through
April, the company generated a fair amount of business. However, Janet and Omar’s owner equity is
lower than they had expected, and they seem to be losing money every month, even though sales are
steady. Below is April’s balance sheet for Rings and Things.

 Assets

Cash (bills and coins) $35

Bank checking account  $1,997

Materials (beads and wires) $40

Finished jewelry $100

Office supplies $50

Furniture  $100

Total  $2,322

Liabilities

Balance on loans         $925

Payroll $1,000

(1 salesperson who works 20 hours/month)

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 Student Guide (continued)

Total                            $1,925

Assets – Liabilities = Owner Equity

      $2,322 total assets

–    $1,925 total liabilities

=  $407 owner equity

1. Based on the balance sheet for April, offer two ways in which Janet and Omar can increase their
owner equity.

they can increase product prices and INCREASING product SALES

2. Review the liabilities section of the balance sheet for Rings and Things. What problem can you
identify with the payroll information, particularly as it relates to how much the one employee gets
paid? What solution would you offer Janet and Omar?

Janet and Omar should decrease the hourly rate to some more standard becue the person who works for
20 hours is make $50 dollars an hour. this would decrease their liability cost by a lot.

Section 2: Analyzing Cash Flow

After reviewing their balance sheet, Omar and Janet create a profit-loss statement to see how much
money they are spending versus how much money their business is bringing in.

Below is April’s cash-flow statement for Rings and Things.

 Operating Activities

Cash in
Online sales  $600
In-store sales $1,000
Total operating cash in  $1,600
 
Cash-out
Supplies                                 ($300)
Labor                                    ($1,000)
Rent                                       ($350)
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Utilities                                  ($100)
 
Net operating activities  –$150

1. Based on the profit-loss statement, does Rings and Things have a positive or negative cash flow?
Why?

2. Based on the profit-loss statement, name two ways Janet and Omar can improve their cash flow.

stop funding people so much money for just 20 hours of work and

, buy quantities that you can manage/ make a budget.

3. Omar and Janet decide to revise their budget for Rings and Things. What suggestions about labor
costs would you make if the goal is to improve the business’s cash flow?

they can improve product stock and lease and don’t buy.

4. Omar and Janet are also trying to forecast what their federal and state income taxes will be at the end
of the year. If Rings and Things had a negative cash flow of –$150.00 per month from January
through April, but a positive cash flow of $1,000.00 per month (after expenses) from May through
December, on what dollar amount will they determine their income taxes? What expenses could be
used for tax deductions?

$7400

Taxable income is the portion of gross income that is subjected to tax. To arrive at this, necessary deductions like
tax-deductible expenses are deducted

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