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ANGELES CITY NATIONAL TRADE SCHOOL

Senior High School

ENTREPRENEURSHIP
QUARTER 4: WEEK 4
FORECAST THE REVENUES OF THE BUSINESS

Name of the Learner: ____________________________ Grade Level: __________

Section: _______________________________________ Date: ________________

Background Information
What is Revenue Forecast?
Revenue is the income obtained by a business from its sales of goods (referred to as sales
revenue) or sales of services provided to its customer (referred to as service revenue).
Forecasting revenue goes hand-in-hand with forecasting sales. Revenue Forecast is the
calculation of the quantity of cash that a company will receive from sales in products or services
during a particular time. The business revenue forecast is an essential part of business planning
though it is not intended to give actual figures for each year's earnings.

Purpose of forecasting revenue

1. Can help you discover why, when, where, and how of your sales activities.
2. It can assist you to come up with a better strategy to maximize your profit.
3. It can also help with your cash flow management through planning your capital needs to keep
away from lacking payments, dropping suppliers and investors, and adverse credit history.
4. It can assist to determine profit margin and contribution to gross profits.
5. It can manage production scheduling to prevent bottlenecks that would possibly cause lost
income and help to spot potential downtimes that cause to pay workers.
6. It can also identify peak hours.
SIMPLE STEPS TO FORECAST REVENUE
1. Choose which forecasting methodology primarily based on the business is needed, how much
time you have, and your degree of confidence in the data.
a. TOP-DOWN FORECASTING. It is a method of estimating a company’s future performance by
starting with high-level market share (your TAM-total available market), potential market share
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and down to revenue. For example, if your company is selling a Mobile Phone, you may look at
the number of consumers who have purchased mobile phones.
b. BOTTOM-UP FORECASTING- It is a method of estimating company’s future performance via
starting with low-level company data and working up to revenue.
**You can calculate the company’s estimated revenue by multiplying the number of orders and
the average price.
c. QUALITATIVE FORECASTING- It is an estimation methodology that uses professional
judgment instead than numerical analysis. It depends upon the information of experienced and
expert consultants to provide insights into future outcomes.
d. QUANTITATIVE FORECASTING- It is a statistical approach to make predictions about the
future which makes use of numerical measures and prior results to predict future events. They
are highly structured on mathematical calculations.

2. Identify and break down your revenue drivers so that you can forecast them later. These are
the metrics that will drive your revenue:
● Salespeople
● Marketing
● Number of customers
● Average frequency of purchase (how often a single customer buys your product)
● Average purchase volume (how many products a single customer buys)
● Variety of products Amount sold of each product
● Prices of each product
● Sales cycle (how long from start to finish does it take a salesperson to close a sale)

3. Project the drivers and use the drivers to forecast the revenues. And compute the Sales
Revenue.
Formula for Revenue: Price of per unit x number of unit sold = revenue

Forecast Expenses Incurred

Businesses incur more than a few types of expenses. An expense is the cost of operations
that a business incurs to generate revenue (Liberto 2020). It is the cost of doing business; the
sum of all activities that result in a profit. It is necessary to recognize the distinction among
expenditure, expense and cost. Expenditure refers to the amount incurred in a long term period
by the company to purchase and increase the value of fixed assets (Morah 2019). On the other
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hand, expenses refer to the costs that are ongoing payments incurred on a short term basis and
used to generate revenue. Cost, it refers to the amount of money spent on the production or
creation of goods or services (Cambridge Dictionary n.d.).
As the diagram above illustrates, there are several types of expenses. The common way
to categorize them is into operating vs. non-operating (Adkins 2019) and fixed cost vs. variable
cost (Fresh Books Accounting n.d.).

OPERATING NON-OPERATING FIXED COST VARIABLE COST

EXPENSE EXPENSE
An expense a This is not related to a An expense that An expense that
business incurs in company’s day- remains constant for changes directly and
order to keep running to day operation or a period of time proportionally to the
the operation. manufacturing. irrespective of the changes in business
level of outputs. Does activity level or
not vary directly to volume. This also
sales. refers to the actual
costs of making the
product or providing
the service.
Payroll Depreciation Rent Transaction fees
Insurance fees Amortization Salaries and Commissions
License fees Bank fees wages Marketing and
Rent Lawsuit payments Loan payments advertising
Marketing and associated fees Direct labor
(advertising and Currency exchange Taxes
promotional fees) rate Costs of goods sold
Accounting fees Restructuring costs Materials and
Building Obsolete inventory supplies
maintenance and Interest Packaging
repairs Taxes
Utilities
Attorney’s fees
Property Taxes
Travel Expenses
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You must forecast each expense of the business including:

Startup Expenses- These are the expenses incurred for the duration of creating a new business
such as pre-operating expenses (Morah 2019).
Fixed Costs - All the overhead costs of the business.
Variable Costs - All of the costs that vary with the business.

Compute Profits
The terms "profit" and "income" are often used interchangeably in day-to-day life. Profit is
generally understood to refer to the cash that is left over after accounting for expenses (Kenton
2020). Computing a profit or loss has to be completed by all companies of any size, form the small
enterprise to large enterprise. It is in a simple calculation Total Revenue – Total Expenses = Profit.
1. Compute all the revenue from sales of goods and services Example: You owned school
supplies. September 1, 2020, you sold 10,000 worth of bond papers to Sapang Bato National
High School. September 2, 2020, you sold to Angeles City National Trade School 10,000 worth
of bond papers and to Sapang Bato Elementary School 15, 000 worth of ink and bond papers.
September 3, 2020, you sold 10,000 worth of school supplies from various customers.

DATE ITEM/S AMOUNT

September 1, 2020 Bond papers 10, 000
September 2, 2020 Bond papers and ink 25, 000
September 3, 2020 School supplies 10, 000
Total Revenue: 45, 000

2. Compute all the costs and expenses for the accounting period ( 1 month). For example:
Let’s say your school supplies business spent 3,500.00 for paying your store rentals and 2,000.00
for your saleslady salary. In this case, your total expense is 3,500.00 + 2,000.00 = 5,500.00.
3. Subtract all the expenses from the revenue. You just simply subtract your expenses to
your sales revenue. The money left represents your business profit. In the example, you already
computed your total revenue and total expenses from your school supplies business. Subtracting
your total expenses from your total revenue gives you 45,000 – 5,500 = 39, 500 profit.
4. Note that a negative result for profit is called net loss.
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Learning Competency:
Forecast the revenue of the business
Forecast the cost to be incurred
Compute Profits
TLE_ICTAN11/12EM-Ia-2

Activity A
Direction: Instruction: Read the statement comprehensively. Identify which of the statements
best described as Fixed Cost, Variable Cost, Operating Expense, and Non-Operating expense.
1. Your business rents a space at CHH building on Friendship Highway where you pay 25,000
monthly. This is an example of __________.
2. If you own a home, you must pay using electricity. The amount you pay changes monthly
depending on how much you consume. This is an example of a _________.
3. An expense that is not related to your company’s day-to-day operation.
4. An expense of your business incur in order to keep running your business.
5. The actual costs of making a product or providing the service.

Activity B
Direction: Compute Expenses, Sales Revenue, and Profits
Transactions for September 2020 were as follows:
Advertising costs paid in cash 2,000
Purchased equipment for 6,000 cash
Paid 1,500 cash for September Store rent
Provided services to customers 7500.
Cash collected from customers 15,000.
1. Identify and calculate total revenue.
2. Identify and calculate total expenses.
3. Compute profits.

Activity C
Direction: Essay. Minimum of 150 words.
1. How Forecasting can contribute to the startup business?
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Prepared:

EDUARD DAYAO MANALO

SHS Teacher
References
BOOKS

DepEd SLMs

Adkins, William. 2019. Small Business Chron. March 1. Accessed September 11, 2020.
https://smallbusiness.chron.com/difference between-operating-nonoperating-expenses-39827.html.

n.d. allBusiness. Accessed September 11, 2020. https://bit.ly/35uHMA5.

n.d. bdc. Accessed September 9, 2020. https://bit.ly/2RasxUC.

n.d. Cambridge Dictionary. Accessed September 11, 2020.

https://dictionary.cambridge.org/us/dictionary/english/cost.

n.d. Fresh Books Accounting. Accessed September 10, 2020. https://bit.ly/35wgdGw.

Kenton, Will. 2020. Investopedia. July 21. Accessed September 11, 2020.
https://www.investopedia.com/terms/p/profit.asp.

Liberto, Daniel. 2020. Investopedia. August 23. Accessed September 12, 2020.
https://www.investopedia.com/terms/e/expense.asp.

Morah, Chizoba. 2019. Investopedia. November 27. Accessed September 12, 2020.

https://corporatefinanceinstitute.com/resources/knowledge/accounting/expenditure/.

Murphy, Chris B. 2020. Investopedia. March 13. Accessed September 10, 2020. https://bit.ly/33k8jgI.

SCORING RUBRIC
SCORE INDICATORS
• Student understanding of concept is clearly evident.
10 • The student uses effective strategies to get accurate results.
• Student uses logical thinking to arrive in best business.
• Student understanding of concept is evident.
8 • The student uses appropriate strategies to arrive at a result.
• Student shows thinking skills to arrive in good business
• Student has limited understanding of a concept.
6 • Student uses strategies that are ineffective.
• Student attempts to show thinking skills.
• Student has a complete lack of understanding of concept.
5 • Student makes no attempt to use strategy.
• Student shows no understanding