LEAP - Business Finance - Q3 W3 W4
LEAP - Business Finance - Q3 W3 W4
LEAP - Business Finance - Q3 W3 W4
II. MOST ESSENTIAL • identify the steps in the financial planning process
LEARNING COMPETENCIES • illustrate the formula and format for the preparation of budgets and
(MELCs) projected financial statement
• explain tools in managing cash, receivables, and inventory
•
III. CONTENT/CORE CONTENT • illustrate the financial planning process
• prepare budgets such as projected collection, sales budget, production
budget, income projected statement of comprehensive income, projected of
financial position, and projected cash flow statement
• describe concepts and tools in working capital management
Suggested
IV. LEARNING PHASES Learning Activities
Timeframe
INTRODUCTION
Liquidity refers to the ability of a company to pay maturing obligations. The current assets of a
company are compared with its current liabilities to determine its paying capacity. Generally assets
which are expected to be converted to cash within one year such as accounts receivable and
inventories are classified as current assets.
Capital structure provides information regarding the amount of assets financed by debt or
liabilities and equity. For example, if a company has P1million assets and has liabilities of P400,000,
its capital structure is 40% liabilities (P400,000 + P 1,000,000.00) and 60 percent equity(P10,000 -
400,000)+ (P1,000.000. While debt or liabilities are not necessarily bad in business, too much of it
is not also good as it exposes the company to higher probability of bankruptcy.
Statement of Profit or Loss or Income Statement
The statement of profit or loss or otherwise known as income statement provides information
regarding the revenues or sales, expenses and next income of a company over a given accounting
period. This accounting period may be for a month, a quarter or a year. The income reported by a
company is not that useful if the accounting period is not stated. In analyzing earnings performance
, a comparison with the previous periods and with other companies, especially those coming from
the same industry, is a must. In analyzing statement of profit or loss, it is important to identify how
much of the income comes from core business and how much comes from the non-core business.
Core Business refers to the main business of a company.
In 2014 JSC Foods Corporation had an operating cycle of 58 days computed as follows
Operating Cycle = days inventories + days receivable
Operating Cycle = 42+16 when JSC Foods Corporation bouth the merchandise did it already pay
the merchandise bought? Chanses are the company was given credit terms. As our days payable
suggest payment to suppliers averaged 43 days in 2014. If we are interested to find out how long it
takes the company to collect recievables from the time the cost of the merchandise sold was actually
paid a cash conversion cycle or cometimes called net trade cycle can be computed. Formula is shown
below:
Cash Conversion Cycle == Operating Cycle – Days payable
For JSC Food orporarion, its cash conversion cycle is 15 days computed as follows:
ENGAGEMENT
Below are the summarized financial statemetn of ABM Corporation for 2021 and 2020 (in million of
peso)
2021 2020
Revenues 168,331 163,033
Cost and Operating 125,515 122,529
Expenses
Operating Pfrofit 42,816 40,504
Net Income 35,453 36,099
Current Assets 67663 84,741
3. Enumerate the three working capital financing polices and describe each breifly
VI. REFLECTION Explain how financial statement analysis helps the owners to decide regarding the business. What
economic information does it provides. Cite example.
References: Business FinancePrinted in the Philippines by the Department of Education – Schools Division Office of Bataan
https://bit.ly/3gUG4N3