To be an entrepreneur is to be in business.

And to be in business means to earn money by providing people with products and services that they need from day to day. The entrepreneur is the one who is able to: (a) see the needs of others as an opportunity for business, (b) put together the resources necessary in order to meet those needs, and (c) deliver the needed goods and services at the right place, at the right time, to the right people and at the right price. Aside from these, entrepreneurs must know the basics of bookkeeping. Know how to analyze Financial Statement and can made decisions that can improve businesses.
Compiling, analyzing, and understanding financial statements provides business owners one of the most important tools for reducing the considerable risk involved in starting and growing a business.

You are to analyze K-L Fashions, Inc. Financial Statement as of 31st of December 2009-2010. At the end of the week you are to present your given suggestions and recommendations as to how the business should be improved, in a power point presentation.

DAY 1 Group yourselves into 4 members. Each one will portray as:
Owner Owners use financial statement data as a way to measure whether their money is working as hard in the business as it would be in an alternative investment. Review financial statements, sales and activity reports, and other performance data to measure productivity and goal achievement and to determine areas needing cost reduction and program improvement. Managers, measures the operating performance in terms of profitability and return on invested capital. They also interested in measuring operating efficiency, asset turnover, and liquidity or solvency and evaluate potential credit customers and key suppliers. Managers are seekers of product linkages. They focus on the current section of the balance sheet. Extend credit to trade customers, and are interested in the solvency of borrowers or customers.

Manager

Short-Term Creditors

Long-Term Creditors

Bankers and other long-term creditors want to be assured of receiving interest and principal when each become due. These creditors are particularly interested in the earning power and the present and future financial capacity of the borrower. Long-term creditors review the businesss financial statements. They want to know that the product or service the business offers can make the company money over the long term. Long-term creditors makes assure that a business can still make a profit after meeting their regular obligations, such as payroll.

Owners 1. How well is the company doing as an investment? -The Return on Investment (ROI) Return on Equity [Net Income Owners Equity (Average)] 2. How well has management employed the company's assets?

- The Return on Assets (ROA) [Net Income Average Total Assets]

Managers 3. Are profits high enough, given the level of sales? - In other words, how efficiently is management conducting operations?

-The Net Profit Margin [Net Income Sales (or Return on Sales) 4. How well are the company's assets being employed to generate sales revenue?
- The Asset Turnover ratio [Sales Average Total Assets] 5. Are receivables coming in too slowly?

- The Average Collection Period [(Average A/R Annual Credit Sales) x 365] 6. Is too much cash tied up in inventories?
- The Inventory Turnover [Cost of Goods Sold Expense Average Inventory]

Short-Term Creditors
7. Does this customer have sufficient cash or other liquid assets to cover its shortterm obligations? - The Current Ratio [Current Assets Current Liabilities]

8. How quickly does the prospective credit customer pay its bills?
- The Average Age of Payables [(Average Payable Net Purchases) x 365]

Long-Term Creditors
9. As a potential or present long-term borrower, is the company's debt load excessive? -The Debt-to-Equity (D/E) [Total Debt Total Equity] 10. Are earnings and cash flow sufficient to cover interest payments and provide for some principal repayment? - The Times Interest Earned (TIE) [Income + (Interest + Taxes) Interest Expense

DAY 4 4.) As a group create a presentation about your findings and recommendations for the business to improve. (Please see attached presentation template). DAY 5 5.) Present your output in class. (Please refer to presentation rubric).

Here are some websites on which you can refer your work about Entrepreneurship. http://www.hrsbdc.org/wp-content/uploads/2011/04/VSBDCFinancialStatementResourceGuide.pdf and read pages 2229 for additional knowledge. Return on Equity Analysis http://www.wikicfo.com/Wiki/Default.aspx?Page=Return%20on%20Equity&NS=&AspxAutoDetectCookieSupport=1 Return on Asset Analysis http://www.wikicfo.com/Wiki/Return%20on%20Asset.ashx Net Profit Margin Analysis http://www.financeformulas.net/Net_Profit_Margin.html Asset Turnover ratio Analysis http://www.financeformulas.net/Asset_Turnover_Ratio.html The Average Collection Period Analysis http://www.financeformulas.net/Average-Collection-Period.html The Inventory Turnover Analysis http://www.financeformulas.net/Inventory_Turnover_Ratio.html The Current Ratio Analysis http://www.financeformulas.net/Current_Ratio.html The Average Age of Payables Analysis http://www.financeformulas.net/Days-in-Inventory.html The Debt-to-Equity (D/E) Analysis http://www.financeformulas.net/Debt-to-Equity-Ratio.html The Times Interest Earned (TIE) Analysis http://www.wikicfo.com/wiki/Ratio%20Analysis%20Time%20Interest.ashx http://accountingexplained.com/financial/ratios/times-interest-earned Analyzing Income Statements http://suite101.com/article/financial-statement-analysis--how-to-read-a-financial-statement-a265878 http://www.apexcpe.com/publications/171016.pdf http://www.terry.uga.edu/~akefalas/courses/mirrors.htm Understanding Financial Statements http://www.dnb.com/US/communities/credit/understanding_financials.asp

By doing your own bookkeeping: *you'll minimise costs; *have more control; and *get a better understanding of your financial information and operations. Income statements provide a good information about financial successes and troubles. It indicates profitability of the business. More importantly it allows entrepreneurs to monitor the business financial position and show results of the managements liquidity of the resources.