R epublic of the P hilippines

D epartment of E ducation
N a t i o n a l C a pi t a l Re g i o n
Sc h o o l s D i v i s i o n O f f i c e o f La s Pi ñ a s C i t y

NAME: ___________________________________________ Score: ___________________

GRADE & SECTION __________________________ Teacher: ___________________

MODULE IN ABM12
ENTREPRENEURSHIP
Third Quarter
Week 5
Screen the proposed solution/s based viability, profitability and customer
Lesson 5
requirements

What I Need to Know

1. The learner screen proposed solution based from Viability

2. The learner screen proposed solution based from Profitability
3. The learner screen proposed solution based on Customer Requirements
Learning Competencies (Essential Competencies) Mga kasanayang pagkatuto

Code: CS_EP11/12ENTREP-Ob-c-5

Let’s Recall (Balikan natin)

An entrepreneur is
affected by his personal aspects,
abilities and skills. According to Morato, “In
screening opportunities, the entrepreneur first has to
consider his or her preferences and capabilities by
asking three basic questions: Do I have the drive to
pursue this business opportunity to the end? Will I
spend all my time, effort, and money to make the
business opportunity work? Will I sacrifice my
existing lifestyle, endure emotional hardship, and
forego my usual comforts to succeed in this business
opportunity?” (Morato 2016). This is true in the
initial screening of proposed solutions since an
entrepreneur should have a strong will to succeed.

Let’s Understand (Pag-aralan natin)

To have a better understanding, let's define viability, and profitability from known dictionaries on the internet.
Viability
“The ability as intended or to succeed; The degree of chance that something will succeed”(Cambridge
University Press 2020)
Morato (Morato 2016) have the “12 R’s of opportunity
screening” below but we will be focusing on returns as positive
results of business and risk is the corresponding negative part of
having a business which is usually encountered by entrepreneurs.
Please check which among the levels of risk and return
matrix the proposed solution based on viability of products and
services will be categorized . This will help in the decision making
of the entrepreneur.

1
 Risk Low Risk Medium Risk High Risk

Return

High Return BEST GOOD FAIR

Medium Return GOOD FAIR BAD

Low Return FAIR BAD WORST

Morato 2016
To interpret the table above from Morato (Morato 2016), returns are categorized by having high return,
medium return and low return and its connection to risk as identified on the right side of the table as Low risk,
medium risk and high risk. Having high return with low risk is the best solution in business. On the next
column, having high return with medium risk is still a good solution for business. The last column under the
high return category is high risk and is a fair solution. The medium return category with low risk is still a good
solution in business and medium return with medium risk is a fair solution but medium return with high risk is a
bad solution. The lowest part of the table is low return with low risk is a fair solution but having low return with
medium risk is considered as a bad solution. The undesirable part is low return with high risk and it is the worst
solution for any business.
Determine where your proposed product will fall among the categories above on return and risk
assessment to better decide which among your proposed products and service will be continued.
Morato’s “12 R’s of opportunity screening” (Morato 2016) is itemized below.

Morato 2016
Items 1 to 10 have more advantage to business if your
proposed product or service has these qualities but Item 11 and 12
should be lessened because having more risk and more resources
required lessen the viability, profitability and potential of business
success.
Profitability
“The state or condition of yielding a financial profit or gain. It
is often measured by price to earnings ratio”. (WebFinance Inc 2020)
Price will be discussed in detail on the marketing aspect for
week 7 - 9 As we go along the discussions, we will tackle further
earnings or financial ratios for profitability.
According to Ramos' blog, viability, profitability and
customers requirements are very important to the success of the
entrepreneur “These days, the customer is king. They are much more informed, much more assertive, much
more discerning, and their tastes and demands change like the seasons. Gone are they days where companies
largely dictated how markets more and what consumers want”(Ramos n.d). That is why entrepreneurs need to
readjust to customers' requirements.
In screening for profitability of business and entrepreneur should be knowledgeable with the four
financial statements, (1) Income statement; (2)Statement in changes in equity (3)balance sheet and (4) cash
flow statement but that will be discussed further in Financial Forecasting on Quarter 2 week 1-4 but let's
describe it brief for better understanding
Financial Forecast and Determination of Financial Feasibility
Income Statement
This is a financial statement that is affected by the enterprise revenue and expense in a certain period. It
is best described in the formula below
REVENUES - EXPENSES = INCOME PROFIT (LOSS)
Table 1. Sample Income Statement (George’s
Catering)
(Celender 2020)
As you can see in Table 1. Sample income
statement(Celender 2020), on the third column, the income
of 15,500 has been deducted by expenses (4200) having a
result of 11,300 or what we call net profit. The open and

2
closed parenthesis that enclosed 4200 shows a negative or a deduction in accounting. In some cases, there is a

net loss if the

result is negative or with an open close parenthesis.
Table 2. Sample Statement of Changes in Equity
(George’s Catering)

In table 2 sample statement of changes in equity, (Celender 2020) you can see that equity is also
called capital. To get the balance at the end of the period, you should add the capital of 15000 and
profit of 11300 then deduct the (500) from drawings to have the result of 25800
Balance sheet
“Creating the balance sheet is a bit more complicated because one has to look at three
different things: assets, liabilities, and equities”.(Morato 2016)
Assets are all the investments in the enterprise like cash, account receivables, inventories,
land building and equipment
Liabilities are the enterprise’s bank debts, accounts payable lending investors including debt
to suppliers if the enterprise a merchandising business. The balance sheet accounting equation is
described below.
Equity is also called capital or the amount invested by the entrepreneur to start his business
ASSETS = LIABILITIES + EQUITY
The equation shows that all the assets of the
enterprise equals all liabilities and equity. They should
always be balanced or equal to each other. Otherwise,
there is a problem in the accounting process that causes
the inequality on the balance sheet. You can see the
example of balance sheet for George’s Catering
(Celender 2020)
Table 3. Example Balance Sheet (George’s
Catering)
As you can see in table 3 Balance sheet of
Gorge’s Catering on the 31st of May 2010, Total assets
of 26,800 is directly equal to or the same with the Total
equity and liabilities amounted to 26800 also.

Table 4. Example Cash Flow Statement (George’s

Catering)
As you can see in table 4 example of cash flow
statement the different activities from operation,
investment and financing and how it affects either
increase or decrease in cash of the enterprise as you
can see in the lower part of the table.

After having an overview on different financial

statement, entrepreneurs should include the know how
on financial ratio as taken from the textbook author
Morato(Morato 2016) for the formula on payback period,
cash payback period, return on sales, return on assets
and return on investment and applying the data from
“George’s Catering” (Celender 2020) can be computed
as follows:

TOTAL INVESTMENT
PAYBACK PERIOD = ANNUAL NET INCOME AFTER TAXES
To compute for the income payback period based on George’s Catering Balance sheet on
table 4, which specifies investments of $25,800 divided by net income after taxes of $22,600 a year
on table 1 , we can conclude that it would take around 1.14 years for the enterprise to recover the
investment.
(George’s Catering) 25,800
PAYBACK PERIOD = 22,600 = 1.14 YEARS
There is also the return sales (ROS) ratio where the entrepreneur calculates how much profits
the enterprise is earning for each peso sold. The formula is as follows:
NET PROFIT AFTER TAXES
RETURN ON SALES = SALES/INCOME
Substituting the variable into George’s Catering estimated figures on table 1 15500 x 2 =
31,000 income for a year:
22600

3
 RETURN ON SALES = 31,000 =.71 or 71%
Return on assets (ROA) or return on investments (ROI) formula
ROA or ROI = NET PROFIT AFTER TAXES
TOTAL ASSETS / INVESTMENTS
Again, substituting the variables using George’s Catering estimated figures on table 1, net
income after taxes of $22,600 a year and dividing it to total assets of 26800 on table 4 having a return
on assets of 84%.
22600
RETURN ON ASSETS = 26800 = .84 or 84%
Consumer requirements
According to Morato (Morato 2016). “Consumer preferences refer to the tastier of particular
groups of people. Some examples are the clothes people wear the food they eat the music they listen
to and the movies they watch”. This is true for millennials because they are inclined with the
technology, they usually are the first in the house to patronize online shopping, movies and other
trends. “The consumer’s age, culture, and status affect their preferences“ (Morato 2016) A new
normal culture being created by the Covid 19 pandemic for quarantine in many areas in the world
which limits people to face interactions and mostly staying home have made people increase their
purchases online. Different delivery modes and services immersed to satisfy the demands of the
customers. These changes made entrepreneurs innovate to satisfy growing needs and demands..
“Factors that affect the choices of the customers”: (Morato 2016)
1. Their purchasing power or disposable income
2. Their proximity or accessibility to the goods/services
3. Their individual desires and preferences
4. Age or generational groupings
5. Social, cultural, or ethnic background
6. Their peer group preferences
7. Gender
8. The season of the year
9. Personal identification w/ trend setters
10. Educational attainment
11. Their technical proficiency and product expertise
12. Their motivational impetus
13. Their lifestyle preference
14. Their susceptibility to certain advertising and promotional appeals
Having these customer factors in mind as tools an entrepreneur, you can screen
proposed products and services that will meet customer requirements

Let’s Apply (Pagyamanin)

Gawain 1
1. What is the payback period of Juan’s bakery if he invested P80,000 and a net
income of P50,000 a year?
A. 1.5 years B. 1.6 years C. 1.7 years D. 1.8 years
2. Pedro has a capital of P50,000 in his Electronics service business and earning P40,000 a year less
expenses. What is his payback period?
A. 1. 25 years B. 1.35 years C. 1.4 years D. 1.5 years
3. What is the return on sales of Michael if he has a net income of P80,000 per year with a sales of
P45,000 in every 6 month period?
A 80% B. 85% C. 88% D. 90%
4. What is the return on assets of Joe if he has a net income of P60,000 per year with a total asset of
P95,000?
A 60% B. 63% C. 65% D. 70%
Gawain 2
Morato 2016
In
having your
proposed
product and
service
, check among
the 12R’S of
opportunity
screening

4
grid from very high to very low with the corresponding
equivalent numbers 5-1 multiplied by the given weight to
see the scores. Add the scores of 1 to 10 R’S then
Deduct the scores taken from 11 and 12 R’S. The highest
result of the proposed product as an opportunity has the possibility of success.
Note:(Tandaan)
“Criteria numbers 1 to 10 are positive indicators; meaning, the more of them, the better. Criteria
number 11 and 12 are negative indicators; meaning, the less of them, the better. Hence, the rating system is
reversed for the negative indicators”.(Morato 2016)

Let’s Analyze - Subukin natin

Situation analysis
*rating x weight = score
Tom wants to start his own bakery and pastries business in Evacom Paranaque where he
lives and most of his friends. He has the skills acquired from school and the strong will to
have his own shop. He has an initial investment earned from his previous job worth
P40,000 so he plans to lessen the cost or expenses in renting a place and have its baking or
production area in their house instead. They also have a bicycle worth P5000 ready for a delivery for nearby
orders. The baking equipment he bought for his business is P30,000. He projected a net income of P5,000 per
month deducting the cellphone load of 500 and a salary for his friend in every delivery P800. Mostly, less cost
of operation because he is doing it online. To increase his operation, he borrowed P5,000 to his brother but will
be returned to him without interest in a year.
Activity needed to do
1. Create a table for Income statement,
2. Create a table for Statement of changes in equity
3. Create a table for Balance sheet statement
4. Compute for the payback period
5. Compute for the return of assets.
References
Cambridge University Press. (2020) “ Cambridge advance learners dictionary and thesaurous”.
Retrieved from https://dictionary.cambridge.org/us/dictionary/english/viability

Cambridge University Press. (2020). “Cambridge business english dictionary “. Retrieved from
https://dictionary.cambridge.org/us/dictionary/english/viability

WebFinance Inc. (2020). What is profitability? definition and meaning-BuinessDictionary.com.

Retrieved from http://www.businessdictionary.com/definition/profitability.html

Ramos,Timothy. (n.d.) Runrun.it.blog. Profitability analysis, why so important. Retrieved from:

https://blog.runrun.it/en/profitability-analysis/)

Artphotovideo. Royalty-free stock illustration. (2020) Digital illustration business viability. Image. Retrieved
from https://www.shutterstock.com/image-illustration/digital-illustration-business-viability-graphic-
1741184534

Tashatuvango. Bigstockphoto (2020). Profit growth-image and photo. Image. Retrieved from
https://www.bigstockphoto.com/image-177192133/stock-photo-profit-growth-increase-concept-
with-doodle-icons-around-on-the-white-wall-background-profit-growth-inscription-on-modern-
illustation-with-green-arrow-and-doodle-design-icons-around-3d

Celender, Michael (2020). Income statement - example, format and explanation. Retrieved from
http://www.accounting-basics-for-students.com/income-statement-
example.html#gallery[pageGallery]/1/

Celender, Michael.(2020) Accounting basics for students. Balance sheet and format (Vertical).
Retrieved from
http://www.accounting-basics-for-students.com/balance-sheet-example.html

Celender, Michael (2020). Four types of financial statements: Definitions, examples, objectives.
Retrieved from
http://www.accounting-basics-for-students.com/financial-statements.html

Morato Jr., Eduardo A., (2016). Entrepreneurship for K-12 Education. Rex Bookstore
Name: ____________________________________ Grade & Section: _____________

Teacher: ___________________________________ Date: ________________

5
 Let’s Try (Evaluation)
Multiple Choice: Choose the best answer for the questions provided
below

1. According to Morato, “In screening opportunities, the entrepreneur first has to

consider his or her preferences and ___________….”

A. Profitability B. Capabilities C. Viability D. Customer requirement

2. It is the the ability as intended or to succeed;The degree of chance that something

will succeed

A. Profitability B. Capabilities C. Viability D. Customer requirement

3. The state or condition of yielding a financial profit or gain. It is often measured by

price to earnings ratio

A. Profitability B. Capabilities C. Viability D. Customer requirement

4. It is a customer preference

A. Profitability B. Capabilities C. Viability D. Customer requirement

5. Are all the investments in the enterprise like cash, account receivables, inventories,
land building and equipment
A. Income B.Assets C. Liabilities D. Equity
6. Are the enterprise’s bank debts, accounts payable lending investors including debt to
suppliers if the enterprise a merchandising business?
A. Income B.Assets C. Liabilities D. Equity
7. it is also called capital or the amount invested by the entrepreneur to start his
business
A. Income B.Assets C. Liabilities D. Equity
8. Synonymous word revenue
A. Income B.Assets C. Liabilities D. Equity
9. This is a financial statement that is affected by the enterprise revenue and expense
in a certain period
A. Balance sheet statement B. Income statement C. Cash flow statement D.
Statement in changes in equity
10. This is a financial statement that determines assets, liabilities, and equities
A. Balance sheet statement B. Income statement C. Cash flow statement D.
Statement in changes in equity