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 VIABILITY AND IMPACTS OF BUSINESS ON THE
COMMUNITY

You graduated from Senior High School, you feel that college education is not
your forte but you have the cash ready for investment and you decided to establish
a computer shop. After calculating your would-be business cost, what else do you
need to know?
You need to know where to locate your business and how much it costs, the
time and money in obtaining permits, the services to be offered and the marketing
strategies on how to get people to patronize your business. Also, you need to know
whether a business endeavor is workable and financially worthwhile before you
spend a lot of money on it. In short, you need to conduct a feasibility study.
A feasibility study is a systematic analysis of all the factors that influence the
probability of success of specific undertaking. It is designed to determine whether
a project is feasible, and if found feasible, to find out the degree of probability. It
covers the market, management, technical, financial and socio-economic aspects of
the business.
In your previous lesson, you are tasked to analyze market demand, market
supply and market equilibrium. This topic had given you the basic idea of what a
market aspect of feasibility study is.
This learning materials will provide you a piece by piece idea of the different
parts of a feasibility study and how to evaluate it to come up with sound decision
whether or not to continue a propose business endeavor. Specifically, it will aid
you to evaluate the viability and impacts of business on the community.

Instructions: Answer the pre-test questions below by writing the letter of the
best answer on a separate sheet of paper. Use CAPITAL LETTERS only.

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1. What is the process of determining whether an entrepreneur’s idea is viable
foundation for creating a successful business?
A. Business Plan C. Industry Analysis
B. Feasibility Study D. Strategic Analysis

2. What is a systematic analysis of all factors that influence the probability of

success of a specific undertaking?
A. Business Plan C. Industry Analysis
B. Feasibility Study D. Strategic Analysis

3. What is a part of the feasibility study that contains the “scope and
delimitation’?
A. Chapter 1 C. Chapter 3
B. Chapter 2 D. Chapter 4

4. Which of the following is NOT part of a macroenvironmental analysis? A.

Demographic trends C. Technological advancements
B. Local pricing regulations D. Company strengths
and weaknesses
5. Which of the following is NOT part of a micro-environment of the firm?
A. Department heads C. Management.
B. Employees D. Labor Union

6. What type of industry do banks, hotels, airlines, law firms and insurance
companies belong?
A. Business sector C. Manufacturing sector
B. Government sector D. Private non-profit sector

7. What are the general classification of industries in the country?

A. Merchandising, teaching and service B. Teaching, merchandising,
manufacturing
C. Manufacturing, merchandising and service
B. Service, Teaching, merchandising and manufacturing

8. Which is NOT a content of the Marketing Aspect of the feasibility study?

A. Project schedule C. Macro environment analysis B.
Micro environment analysis D. Supply and demand analysis

9. Which is NOT an example of a content of Financial Aspect of a feasibility

study?
A. Projected cash flows
B. Projected Statement of Financial Condition C. Projected Statement of
Comprehensive Income
D. Projected Statement of Changes in Owner’s Equity
10. One of the forms of business organization is Partnership. Which is an example
of a partnership among the business name given?
A. ABC Company, Ltd. C. Fernando Amorsolo Co. Inc.

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 B. Albert’s Merchandising D. San Esteban Dev’t. Cooperative.
11. Which of the following statements connotes rejection of the feasibility study? A.
Market has an unfilled up demand equivalent to 60%.
B. Financial statement projections show a negative trend.
C. Raw materials are estimated to lasts fifteen years (15) years.
D. Poll of applicants show qualifications in accordance with job
specifications.
12. Which finding statement could be a basis of approving the viability of proposed
business as to financial aspect?
A. The Statement of Financial Condition shows an increasing cash balance.
B. The Statement of Comprehensive Income shows an increasing trend in
expenses.
C. The Statement of Cash Flow shows an increasing Net Cash Outflow from
operation.
D. The Statement of Comprehensive Income shows an increasing trend in
the cost of sales.
13. Which could be a ground for approval of a feasibility study of a proposed
business of Dina, Donna and Dana as to management aspect?
A. The form of business organization can be registered as cooperative.
B. The form of business organization can be registered as partnership.
C. The form of business organization can be registered as sole
proprietorship.
D. The form of business organization can be registered as a single person
corporation.
14. The Socio-economic aspect of the feasibility study shows the business impact
of the proposed business to the people and the community. Which statement
below can be considered as a positive sign of the business to be viable? A.
The business proposal is tax exempt.
B. The business proposal will pollute the environment.
C. The business proposal can only pay the minimum wage.
D. The business proposal cannot afford to extend legal benefits of its
workforce.
15. Evaluate the correctness of the given general statements in relation to the
Financial aspect of the Feasibility Study?
A. The Statement of Cash Flow is the accrual basis income statement.
B. The Statement of Financial Condition is prepared as of a certain date.
C. The Statement of Comprehensive Income is a cash basis financial
statement.
D. The Statement of Comprehensive Income shows the difference of the
cash balance beginning and cash balance ending.

Read Me! Understand Me!

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Activity 1.
Instructions: Read the bank reconciliation methods, the different
reconciling items and their effects. Understand what you are reading.

Feasibility Study
A Feasibility Study is an analysis made to determine the viability of an idea.
It provides information whether a proposed endeavor is feasible or not. It is based
from the principle of “information is knowledge” so as not to waste precious time
and resources. The entire study is divided into six (6) different parts known as the
chapters. Each chapter contains the sub-parts which are described as follows:

Chapter 1
Chapter 1, covers the introduction, statement of the problem, scope and
delimitation of the study, definition of terms and the review of related literature.
In the introduction, the writer of the feasibility study briefly tells the story of
the business one would want to start then proceed with the statements introducing
the product or business followed by the statement rationalizing why the proponents
opted to choose that idea.
In the statement of the problem, one can found at least three (3) questions
that can be answered by means of the study. The significance part will guide the
proponent to enumerate at least three (3) groups of people that will benefit from the
study and the reasons why and how will these three (3) groups of people benefit
from the study.
The scope and delimitation of the study focus on the things that will be and
will not be included in the study while the definition of terms gives emphasis on the
technical terms use that should be defined so as not to give double meaning and
the review of related literature shows the related articles or researches that can be
used to negate or jibe with the findings in the study.

Chapter II
Chapter 2 is also known as The Marketing Aspect. This part of the study
contains the macro and micro environmental analysis of the paper.
Macroenvironment refers to the external environment of the proposed endeavor.
This may refer to the geography, customs, traditions and belief of the locality while
microenvironment pertains to the environment within the firms such as,
management, human resources and financial capability of the firm.
The marketing analysis will used both the macro and micro environmental
analysis. It must determine what will be the product or business, why will the
product or business be successful and the situations that will affects the success of
the product or business.
Under this aspect of the feasibility study, the SWOT Analysis is a very
important tool to determine the strength as well as the weaknesses of the propose
business or service. It will also determine its opportunities and its threats. It is
important to note that the strength and weaknesses of the company is found in its
internal environment while the opportunities and threats are found in the external
environment.
A simple guide to determine the strength the propose business or product is
“what can be offered by the company or product that is unique?”. Answering this
question will lead you to analyze the value proposition of the proposed business or
product. On the other hand, weaknesses can be determined by knowing the

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loopholes of the propose business or product. The same analysis can be done to the
opportunities. It must answer the question “what are the special characteristics of
the proposed business or product?”. Opportunities maybe not be an asset now but
can be used as a business advantage in the future. Threats can be fixed by
knowing the probable problems that can be encountered by the business or
product.
One of the most important part of this aspect is the demand and supply
analysis.
The simple questions to determine if there are demands of your product would be,
what are the products that you will offer to the market? Why would the consumers
patronize your product? Are the consumers will and have the capacity to buy your
product? Willingness and capacity to buy are two different situations. A person
may be willing to buy but do not have the capacity to buy – not market or a they
may have the capacity to buy but are not willing to buy the product – still no
market. To have a market, the person must have the capacity and willing to pay.

Chapter III
The Management Aspect deals with the organization as a whole. The
organization can be viewed by its organizational structure. The organizational
structure shows the persons occupying the different positions of the organization to
function as a unit for the attainment of its vision and mission.
Relative to this, a job analysis must be performed. Job analysis is
understanding the functions of each position so that job specification and
description can be effective and efficient. Job description are the list of jobs that
will be performed by the person holding the position while job specification refers to
the qualities of the person that will fit the position. It is to be pointed out that the
salary of the person in each position will be given proper evaluation.
The form of business organization must also be given proper attention. The
proponent must know whether the business proposal will be registered as a sole
proprietorship, partnership, corporation or cooperative depending on the available
resources and purpose of the business proponent/s.
The time scheduling of the different activities in conducting the feasibility
study up to the time of actual operation of the propose business must be prepared.
A good foresight and planning will be needed for this purpose. One way to schedule
the foresighted schedules is to use the Gantt Chart. A Gantt Chart is a calendar of
activities, specifying the number of calendar days for each activity.

Chapter IV
This chapter is known as the Technical Aspect. It provides the technical
soundness of the business and gives all the details necessary for the business to
operate. In terms of product, the chapter it makes available the specifications of the
product such as identification of the main product, its components, the description
of the product and the packaging (if available). It also covers the raw materials.
How it is purchased? Where is the location of such raw materials? Why do you
purchase it from there?
In addition, the office and plant location must be specified. Is the office and plant
owned by the business proponent or rented? If it is rented, how much? Is it ready
to occupy or needs to be repaired? How much will be the cost of repair? Where will
the operation of the business be located? These questions must be answered as it
formed part of this chapter.

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Chapter V
This part of the feasibility study deals with the Financial Aspect. Financial aspect
contains the statements of assumption used in the study, Statement of
Comprehensive Income (SCI), Statement of Financial Position (SFP), and Statement
of Cash Flows (SCF).
Statement of assumptions are estimates made by the business proponent
such as initial sales, purchases, expenses and subsequent increases on the
following years that will serve as guide of the reader to understand the financial
statements. The estimates must be based from the Conservatism Principle. This
principle states that it is better to expect losses than income. The Rule of Thumb is
not more than three percent (3%) for all subsequent years increases. Statement of
Comprehensive Income is also known as the accrual basis of determining the
income. It contains the Estimated Sales, Sales Returns and Allowances, Sales
Discounts and expenses. It is prepared for a specific date. It is expected that these
accounts increase per year at a conservative amount or percentage as discussed
above.
Statement of Financial Condition is also known by its old name “Balance
Sheet”. It is prepared as of a specific date. The SFC is divided into three (3) parts –
Assets, Liabilities and Owner’s Equity. The usual accounts found in the asset
section of SFC are, Cash on hand or in bank, Accounts Receivable, Notes
Receivable, Advances to Officers and Employees, Inventories, Fixed Assets and
Accumulated Depreciation. In the liability section, Accounts Payable, Notes Payable
and Accrued Liabilities are included. The Owner’s Equity section contains the
Capital invested by the owner plus additional capital add income derive from
previous years minus the losses encountered in the operation.
Statement of Cash Flows shows the movement of cash along the three (3)
different activity – Operating Activity, Investing Activity and Financing Activity. It
can be prepared by either using the direct and indirect approach.
Direct approach computes the Net Cash Inflow (Outflow) from operating
activity by deducting the actual cash outflow from the actual cash inflow. Net Cash
Inflow (Outflow) from Investing Activity can be solved by computing the difference
between the investment account beginning and end. An increase in the investment
account means Net Cash Inflow from Investing Activity otherwise it will be Net Cash
Outflow from Investing Activity. The Net Cash Inflow (Outflow) from Financing
Activity can also be computed by netting the increase and decrease in liabilities by
means of borrowing. An increase is considered inflow while any decrease is
considered as outflow.
Indirect approach starts at the accrual basis net income (loss) then add
noncash expenses and deduct cash expenses to arrive at Net Cash Inflow (Outflow)
from Operating Activity. The Net Cash Inflow (Outflow) from Investing and
Financing Activities is the same as in direct method.
It is to be emphasized that either of the two approach yields the same result.
The net results of the three activities must equal to the increase (decrease) of the
Cash on hand and in bank at the end of the calendar year.

Chapter VI
This is the Socio-Economic Aspect of the study. It measures the social and
economic impact of the study to the people and the community. Social impact can
be measured when the people living in the community or area of operation of the
proposed business has improved due to employment opportunities offered by the
proposed business while economic impact can be measured by the amount of taxes
paid by the proposed business and employees to the coffer of the government.

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Another way of measuring economic impact of the business is through its
Corporate Social Responsibility, wherein the company may sponsor some trainings
and adopt programs that will help the residents in its area of operation.

Read Me! Answer Me!

Instruction: Analyze each problem independently then answer the

questions that follow. Write your answer on the space provided for
before the number. Use CAPITAL LETER ONLY.

A. Lito Jose wants to establish a computer shop business. What is the most ideal
form of business organization that you will chose and which aspect of the
feasibility study it must be included?
A. Corporation – Technical Aspect
B. Partnership – Marketing Aspect
C. Sole Proprietorship – Financial Aspect
D. Sole Proprietorship – Management Aspect
B. Juan dela Cruz wants to write a feasibility study of its new product named
“Product X”. What part of the feasibility can you see the detailed specification of
the product?
A. Management Aspect C. Socio-Economic Aspect
B. Marketing Aspect D. Technical Aspect
C. Evaluate the given statement then chose the correct answer.
I. Prepare monthly financial statement is an example of job
specification.
II. Accountant is considered as job description. A. Statement I is
true; statement II is false.
B. Statement I is false; statement II is true.
C. Both statements are true.
D. Both statements are false.
D. What could be included in the statement of the problem?
A. What is the market of the proposed product?
B. What is the demand of the proposed product?
C. What is the rate of return of the proposed business?
D. What is the form of business organization that will be used?
E. The following findings of the different aspects of the feasibility study are
presented as follows:
Marketing Aspect – Feasible
Management Aspect – Feasible
Technical Aspect – Feasible
Financial Aspect – Feasible

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 Socio-Economic Aspect – Not feasible
What is your recommendation? A. Accept with
reservation.
B. Accept the business proposal
C. Reject the business proposal.
D. Reject today but accept tomorrow.

Activity. Feasibility Study Cases

What you have to do:
In a separate sheet of paper, answer the cases below.
1. You want to establish a computer shop business. Write three (3) questions that
can be answered by means of the feasibility study?
Rubric:
3 – all questions written are possible questions to be answered by FS
2 – 1 question is not a possible question to be answered by FS.
1 – 2 questions are not a possible question to be answered by FS.
2. What is a good title of a feasibility study that can be made based from number
1?
Rubric:
1 – the title jibe with the requirement.
3. Assume that the business in number 1 is a sole proprietorship business.
Prepare an Organizational Chart. Rubric:
5 – organizational chart is complete, properly labelled, properly
arrange and fitted to the business form.
4 – organizational chart is complete, properly labelled, properly
arrange but does not fit the business form.
3 – organizational chart is complete, properly labelled but not properly
arrange and does not fit the business form
2 – organizational chart is complete, not labelled, not properly arrange
and does not fit the business form.
1 – organizational chart is incomplete, not labelled, not properly arrange
and does not fit the business form.
4. The different accounts in your Statement of Financial Condition in its initial
year of operation has an initial amount of PHP1,000 each. The same is true
with the liability accounts. Prepare at least 3 statements of assumption then
apply it to the financial statement for the second year.
Rubric:
3 – 3 correct statement of assumption; 3 correct application.
2 – 2 correct statement of assumption; 2 correct application.
1 – 1 correct statement of assumption; 1 correct application.

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5. Mr. Jose Lito asked you to prepare a feasibility study of a computer shop
business. After careful considerations of the different aspects, you have found
out that the management, marketing, technical and socio-economic aspects are
feasible. The financial aspect showed a net loss on the first year, earned an
income on the 2nd year and shows increasing trends in the next three (3) years.
What is your recommendation to Mr. Jose Lito? Why?
Rubric:
3 – recommendation is correct; reasoning is correct
2 – recommendation is correct; reasoning is wrong.
1 – recommendation is wrong; reasoning is wrong

Instructions: Answer the post-test questions below by writing the

letter of the best answer on a separate sheet of paper. Use CAPITAL
LETTERS only.

1. What is the process of determining whether an entrepreneur’s idea is viable

foundation for creating a successful business?
A. Business Plan C. Industry Analysis
B. Feasibility Study D. Strategic Analysis
2. What is a systematic analysis of all factors that influence the probability of
success of a specific undertaking?
A. Business Plan C. Industry Analysis
B. Feasibility Study D. Strategic Analysis
3. What is a part of the feasibility study that contains the “scope and
delimitation’?
A. Chapter 1 C. Chapter 3 B. Chapter 2
D. Chapter 4
4. Which of the following is NOT part of a macro environmental analysis? C.
Demographic trends C. Technological advancements
D. Local pricing regulations D. Company strengths
and weaknesses
5. Which of the following is NOT part of a micro-environment of the firm?
C. Department heads C. Management.

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 D. Employees D. Labor Union
6. What type of industry do banks, hotels, airlines, law firms and insurance
companies belong?
A. Business sector C. Manufacturing sector B.
Government sector D. Private non-profit sector
7. What are the general classification of industries in the country?
A. Merchandising, teaching and service B. Teaching, merchandising,
manufacturing
C. Manufacturing, merchandising and service
B. Service, Teaching, merchandising and manufacturing
8. Which is NOT a content of the Marketing Aspect of the feasibility study?
A. Project schedule C. Macro environment analysis
B. Micro environment analysis D. Supply and demand analysis
9. Which is NOT an example of a content of Financial Aspect of a feasibility
study?
A. Projected cash flows
B. Projected Statement of Financial Condition C. Projected Statement of
Comprehensive Income
D. Projected Statement of Changes in Owner’s Equity
10. One of the forms of business organization is Partnership. Which is an
example of a partnership among the business name given?
A. ABC Company, Ltd. C. Fernando Amorsolo Co. Inc.
B. Albert’s Merchandising D. San Esteban Development Corp.
11. Which of the following statements connotes rejection of the feasibility study?
A. Market has an unfilled up demand equivalent to 60%.
B. Financial statement projections show a negative trend.
C. Raw materials are estimated to lasts fifteen years (15) years.
D. Poll of applicants show qualifications in accordance with job
specifications.
12. Which finding statement could be a basis of approving the viability of
proposed business as to financial aspect?
A. The Statement of Financial Condition shows an increasing cash balance.
B. The Statement of Comprehensive Income shows an increasing trend in
expenses.
C. The Statement of Cash Flow shows an increasing Net Cash Outflow from
operation.
D. The Statement of Comprehensive Income shows an increasing trend in
the cost of sales.
13. Which could be a ground for approval of a feasibility study of a proposed
business of Dina, Donna and Dana as to management aspect?
A. The form of business organization can be registered as cooperative.
B. The form of business organization can be registered as partnership.
C. The form of business organization can be registered as sole
proprietorship.
D. The form of business organization can be registered as a single person
corporation.
14. The Socio-economic aspect of the feasibility study shows the business impact
of the proposed business to the people and the community. Which statement
below can be considered as a positive sign of the business to be viable? A.
The business proposal is tax exempt.
B. The business proposal will pollute the environment.

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 C. The business proposal can only pay the minimum wage.
D. The business proposal cannot afford to extend legal benefits of its
workforce.
15. Evaluate the correctness of the given general statements in relation to the
Financial aspect of the Feasibility Study?
A. The Statement of Cash Flow is the accrual basis income statement.
B. The Statement of Financial Condition is prepared as of a certain date.
C. The Statement of Comprehensive Income is a cash basis financial
statement.
D. The Statement of Comprehensive Income shows the difference of the
cash balance beginning and cash balance ending.

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