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Entrep Pre Final Coverage

Forecasting is a tool used by entrepreneurs and business owners to plan for and adjust to future uncertainties by making estimates about revenues and costs based on past and present data. Entrepreneurs use forecasting techniques to determine factors that may affect sales, expenses, profits, and overall business operations in order to reduce future risks. Gross profit is calculated by subtracting the cost of goods or services sold from total net sales. The gross profit rate measures the percentage of gross profit compared to total net sales and indicates the profitability of a business's product or service offerings.

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Jayson Sabejon
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55 views

Entrep Pre Final Coverage

Forecasting is a tool used by entrepreneurs and business owners to plan for and adjust to future uncertainties by making estimates about revenues and costs based on past and present data. Entrepreneurs use forecasting techniques to determine factors that may affect sales, expenses, profits, and overall business operations in order to reduce future risks. Gross profit is calculated by subtracting the cost of goods or services sold from total net sales. The gross profit rate measures the percentage of gross profit compared to total net sales and indicates the profitability of a business's product or service offerings.

Uploaded by

Jayson Sabejon
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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ENTREPRENEURSHIP

FORECASTING – is a tool used in planning that aims to support management or a


business owner in its desire to adjust and cope up with uncertainties of the future.

 It depend on data from the past and present and make meaningful estimates
on revenues and costs.
 It is the same as weather forecasting, though forecasting revenues and
costs is in the context of business.

ENTREPRENEURS USE FORECASTING TECHNIQUES:

 To determine events that might affect the operation of the business such
as sales, expectations, costs incurred in the business as well as the profit
that the business is earning
 Making informed estimates reduces risks that might be experienced by the
entrepreneur in the future.

REVENUE – is a result when sales exceed the cost to produce goods or render the
services. Revenue is recognized when earned, whether paid in cash or charged to
the account of the customer.

SALES – is used especially when the nature of the business is merchandising or


retail.

SERVICE INCOME – use to record revenues earned by rendering services.


COMPUTATION OF GROSS PROFIT

Compute the Gross Profit

The profitability ratios are a group of financial statement that primarily determine
the profitability of the business operation.

The gross profit rate on a product is computed as:

Net Sales xxxxxxx

Less: Cost of sales xxxxxxx

Gross profit xxxxxxx

Note: “LESS” mean subtract, you need to subtract net sales and cost of sales to
get gross profit.

EXAMPLE: By using the formula, the gross of XYZ Trading in the year 2017

Net Sales P 734, 000.00

Less: Cost of Sales - 577, 000.00

Gross Profit 157, 000.00

Profit is the gross income. The amount of gross profit provides information to the
entrepreneur about revenue earned from sales.

The term cost refers to the purchase price of the product including of the product
including the total outlay required in producing it. The gross profit margin is
computed as follows:

gross profit rate = gross profit

net sales

Note: you need to divide the gross profit and net sales, then multiply it by 100 to
get the percentage of gross profit rate.

EXAMPLE: The gross profit rate measures the percentage of gross profit to sales,
indicating the profit that the business realizes from the sale of the product.
The gross profit rate of XYZ Trading for the year computed as follows:

gross profit rate = 157,000

÷ 734,000

= 21.39%

The gross profit rate may signal to the entrepreneur that the amount of margin on
sales is 21.39%. This rate will be used to determine whether the amount of gross
profit can cover the operating of the business. Since the gross profit rate of XYZ
Trading is 21.39%, the cost ratio to sales will be 78.61%. This information will help
the entrepreneur in assessing whether the cost is too high or too low. Any product
with a very high cost will not become competitive in the market. The gross profit
rate will also help the entrepreneur set the selling price.

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