Dr. Filemon C.

Aguilar Memorial College of Las Piñas

Golden Gate Subdivision, Talon III, Las Piñas City

COURSE MODULE

IN

FEASIBILITY STUDY

Compiled and Written

By

PROF. JOANNE CHRISTINE N. SOLON, MaEd

Subject Professor:

Dr. Cynthia Zarate, DBA

Prof. Virgie Valencia Reyes, MBA

Prof. Lucia Lazo, MBA

Dr. Jusffer C. De Leon, CAP, CMIE, LPT, DBA

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Week 1-2

CHAPTER 1

Objectives

1. To understand what Feasibility study is and

thoroughly all aspects of a project, concept, or
plan.
2. To become aware of any potential problems
that could occur while implementing the project.
3. To determine if, after considering all
significant factors, the project is viable—that is,
worth undertaking.
4. Assess personal skills, strengths, talents for
business ideas
5. Conduct primary and secondary research for
a business idea

INTRODUCTION

In 2019, Elon Musk unveiled plans for Tesla’s new Cybertruck. In my opinion, it’s an awful
rendition of a child’s crayon drawing of what a vehicle ought to look like. Other than that,
the truck’s specifications are quite impressive. It has insane amounts of horsepower and
torque, which is common with electric vehicles. On the flip side, there are a few glaring
issues that Musk seems to ignore that make me wonder about the feasibility of Tesla’s
future production model. For example, it offers next to zero outward visibility, and it’s
seemingly only possible to enter the truck from the tailgate. Is Musk’s Cybertruck worth
the expense, time, and effort it requires to build and market?

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

I think he would benefit from a large, in-depth feasibility study into the Cybertruck and
whether or not it’s ready for the mainstream truck market. But what is a feasibility study?
It’s definitely on a higher level than project management basics. The development and
recognition of project management during the last few years has raised the need for
feasibility studies. To say, a feasibility study is the initial design stage for any project or
plan. As the name infers, a feasibility study is an analysis of the viability of an idea.

Feasibility studies help answer the essential question, “should we proceed with the
proposed idea?” The objective study may be completed in conjunction with a SWOT
planning process, which looks at the strengths, weaknesses, opportunities, and threats
that may be present externally (the environment) or internally (resources).

Moreover, Feasibility studies help determine:

a) does the company possess the required resources or technologies; and

b) does the proposal offer a reasonable return vs. risk from the investment.

Feasibility studies can be used in many ways but mainly focus on projected business
undertakings. Businessmen, entrepreneurs, farmers, and others with a business idea
should conduct a feasibility study to determine the viability of their idea before proceeding
with the development of a business. Determining early that a business idea will not work
saves time, money, and heartache later.

A feasible operating change or business restructure is one where the business will
generate adequate cash flow and profits to withstand (a) the short-term risks it will
encounter, and (b) remain viable in the long term to meet the goals of the owner/founders.
The venture might be an investment start-up or the purchase/expansion of an existing
business, beyond its present business footprint or enterprise.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Six parts to any effective Feasibility Study:

1. The Project Scope

which is used to define the business

problem and/or opportunity to be
addressed. The old adage, "The
problem well stated is half solved," is
very apropos. The scope should be
definitive and to the point; rambling
narrative serves no purpose and can
actually confuse project participants. It
is also necessary to define the parts of
the business affected either directly or indirectly, including project participants and end-
user areas affected by the project. The project sponsor should be identified, particularly
if he/she is footing the bill.

2. The Current Analysis

is used to define and understand the current method of implementation, such as a

system, a product, etc. From this analysis, it is not uncommon to discover there is actually
nothing wrong with the current system or product other than some misunderstandings
regarding it or perhaps it needs some simple modifications as opposed to a major
overhaul. Also, the strengths and weaknesses of the current approach are identified (pros
and cons). In addition, there may very well be elements of the current system or product
that may be used in its successor thus saving time and money later on. Without such
analysis, this may never be discovered.

Analysts are cautioned to avoid the temptation to stop and correct any problems
encountered in the current system at this time. Simply document your findings instead,
otherwise you will spend more time unnecessarily in this stage (aka "Analysis Paralysis").

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

3. Requirements

how requirements are defined depends on the object of the project's attention. For
example, how requirements are specified for a product are substantially different than
requirements for an edifice, a bridge, or an information system. Each exhibits totally
different properties and, as such, are defined differently. How you define requirements for
software is also substantially different than how you define them for systems.

4. The Approach

represents the recommended solution or course of action to satisfy the requirements.

Here, various alternatives are considered along with an explanation as to why the
preferred solution was selected.

In terms of design related projects, it is here where whole rough designs (e.g.,
"renderings") are developed in order to determine viability. It is also at this point where
the use of existing structures and commercial alternatives are considered (e.g., "build
versus buy" decisions).

The overriding considerations though are:

• Does the recommended approach satisfy the requirements?

• Is it also a practical and viable solution? (Will it "Play in Poughkeepsie?")

A thorough analysis here is needed in order to perform the next step…

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

5. Evaluation

Examines the cost effectiveness of the approach selected. This begins with an analysis
of the estimated total cost of the project. In addition to the recommended solution, other
alternatives are estimated in order to offer an economic comparison. For development
projects, an estimate of labor and out-of-pocket expenses is assembled along with a
project schedule showing the project path and start-and-end dates.

After the total cost of the project has been calculated, a cost and evaluation summary is
prepared which includes such things as a cost/benefit analysis, return on investment, etc.

6. Review

All of the preceding elements are then assembled into a Feasibility Study and a formal
review is conducted with all parties involved. The review serves two purposes: to
substantiate the thoroughness and accuracy of the Feasibility Study, and to make a
project decision; either approve it, reject it, or ask that it be revised before making a final
decision. If approved, it is very important that all parties sign the document which
expresses their acceptance and commitment to it; it may be a seemingly small gesture,
but signatures carry a lot of weight later on as the project progresses. If the Feasibility
Study is rejected, the reasons for its rejection should be explained and attached to the
document.

Pre-Assessment:

1. Which of the following is not the purpose of Feasibility Study?

a. Provide quality information for decision making

b. Establish market trends
c. Give focus to the project and outline alternatives
d. Specify business alternatives

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

2. Which of the following is not included in the composition of

feasibility study?

a. Financial Feasibility Study

b. Socio-Economic Feasibility Study

c. Management Feasibility Study

d. Entrepreneurial Feasibility Study

3. Why do projects need a project feasibility study?

a. In order to ensure you have enough people to work on the project.

b. To provide detailed information on the budget required for the project

c. To provide accurate information as to whether the project will succeed.

d. To conduct research on your competitors

4. Why Feasibility Study is prepared?

a. Achieved maximum profit

b. Increase construction costs according to design criteria, quality and space

c. Reduce social benefits

d. Maximize risks and uncertainty

5. Which one does not belong?

a. Objectives of the Study

b. Methodology

c. Brief Background of the Study

d. Scope and Limitations of the Study

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Lesson Presentation:

What is a feasibility Study?

A feasibility study is an analysis that takes

all of a project's relevant factors into
account—including economic, technical,
legal, and scheduling considerations—to
ascertain the likelihood of completing the
project successfully. Project managers use
feasibility studies to discern the pros and
cons of undertaking a project before they
invest a lot of time and money into it.

Feasibility studies also can provide a

company's management with crucial information that could prevent the company from
entering carelessly into risky businesses.

In addition, a feasibility study is a practicality assessment for a proposed plan, product,

project management tool, or new execution method. The importance of a feasibility study
is to establish whether or not a company, team, or organization will deliver on its promises
in a satisfactory manner and a reasonable period of time. This is one of the most important
project management techniques you’ll want to learn to save your organization time,
money, and lots of headaches. The final feasibility report is a part of the fifth step of your
project management plan and is presented after you’ve made your initial business case
to your stakeholders.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

KEY TAKEAWAYS

• A feasibility study assesses the practicality of a proposed plan or project.

• A company may conduct a feasibility study if it's considering launching a new
business or adopting a new product line.
• It's a good idea to have a contingency plan in case of unforeseeable
circumstances, or if the original project is not feasible.

Understanding Feasibility Studies

A feasibility study is simply an assessment of the practicality of a proposed plan or project.

As the name implies, these studies ask: Is this project feasible? Do we have the people,
tools, technology, and resources necessary for this project to succeed? Will the project
get us the return on investment (ROI) that we need and expect?

The goals of feasibility studies are as follows:

• To understand thoroughly all aspects of a project, concept, or plan

• To become aware of any potential problems that could occur while implementing
the project

• To determine if, after considering all significant factors, the project is viable—that
is, worth undertaking

Feasibility studies are important to business development. They can allow a business to
address where and how it will operate. They can also identify potential obstacles that may
impede its operations and recognize the amount of funding it will need to get the business
up and running. Feasibility studies aim for marketing strategies that could help convince
investors or banks that investing in a particular project or business is a wise choice.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Feasibility Study vs. Business Plan

A feasibility study is not a business plan. The separate roles of the feasibility study and
the business plan are frequently misunderstood. The feasibility study provides an
investigating function. It addresses the question of "Is this a
viable business venture?" The business plan provides a
planning function.

The business plan outlines the actions needed to take

the proposal from "idea" to "reality.", offers more
discussion of the drafting a business plan.

The feasibility study outlines and analyzes several

alternatives or methods of achieving business success. The
feasibility study helps to narrow the scope of the project to
identify the best business scenario(s). The business plan
deals with only one alternative or scenario. The feasibility
study helps to narrow the scope of the project to identify
and define two or three scenarios or alternatives. The person or business conducting the
feasibility study may work with the group to identify the "best" alternative for their situation.
This becomes the basis for the business plan.

The feasibility study is conducted before the business plan. A business plan is prepared
only after the business venture has been deemed to be feasible. If a proposed business
venture is considered to be feasible, a business plan is usually constructed next that
provides a "roadmap" of how the business will be created and developed. The business
plan provides the “blueprint” for project implementation. If the venture is deemed not to
be feasible, efforts may be made to correct its deficiencies, other alternatives may be
explored, or the idea is dropped.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Reasons to Do or Not to Do a Feasibility Study

Project leaders may find themselves under pressure to skip the "feasibility analysis" step
and go directly to building a business. Individuals from within and outside of the project
may push to skip this step. Reasons given for not doing a feasibility analysis include:

• We know it’s feasible. An existing business is already doing it.

• Why do another feasibility study when one was done just a few years ago?
• Feasibility studies are just a way for consultants to make money.
• The market analysis has already been done by the business that is going to sell
us the equipment.
• Why not just hire a general manager who can do the study?
• Feasibility studies are a waste of time. We need to buy the building, tie up the site
and bid on the equipment.

The reasons given above should not dissuade you from conducting a meaningful and
accurate feasibility study. Once decisions have been made about proceeding with a
proposed business, they are often very difficult to change. You may need to live with
these decisions for a long time.

Conducting a feasibility study is a good business practice. If you examine successful

businesses, you will find that they did not go into a new business venture without first
thoroughly examining all of the issues and assessing the probability of business success.

Below are other reasons to conduct a feasibility study.

• Gives focus to the project and outline alternatives.

• Narrows business alternatives
• Identifies new opportunities through the investigative process.
• Identifies reasons not to proceed.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

• Enhances the probability of success by addressing and mitigating factors early on

that could affect the project.
• Provides quality information for decision making.
• Provides documentation that the business venture was thoroughly investigated.
• Helps in securing funding from lending institutions and other monetary sources.
• Helps to attract equity investment.

Generalization:

It should be remembered that a Feasibility Study is more of a way of thinking as opposed

to a bureaucratic process.

For example, what have just described is essentially the same process we all follow when
purchasing a car or a home. As the scope of the project grows, it becomes more important
to document the Feasibility Study particularly if large amounts of money are involved
and/or the criticality of delivery. Not only should the Feasibility Study contain sufficient
detail to carry on to the next succeeding phase in the project, but it should also be used
for comparative analysis when preparing the final Project Audit which analyses what was
delivered versus what was proposed in the Feasibility Study.

In-Class Chapter Assignment:

1. Form an entrepreneurial team in class, your professor will help you form your group.

2. Discuss several entrepreneurial opportunities that you would want to pursue. Evaluate
them on their profitability, originality, and feasibility. Decide on one opportunity that you
(as a team) want to pursue in class.

3. Document your brainstorming by taking pictures and writing down the minutes of your
meeting.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Supplemental Online References:

https://corporatefinanceinstitute.com/resources/knowledge/other/feasibility-study/

Don Hofstrand, retired extension value added agriculture specialist, [email protected]

Mary Holz-Clause, former co-director, Ag Marketing Resource Center, former associate
vice president for ISU Extension and Outreach

https://www.youtube.com/watch?v=BRowEKGyPh4

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Week 3-5

CHAPTER 2

MANAGEMENT STUDY

Objectives:

1. Describe the major considerations in

the organization and management
aspects of the project.
2. Formulate a well-defined
organization and management
structure for the project.

3. To know the project originators,

investors and managers of the
business and to determine how
much is the capital contribution.

4. To identify the type of ownership to be formed.

5. To enumerate the different positions, qualifications and its duties and responsibilities.

6.. To adopt an organizational structure for the business.

7. To establish a detailed compensation scheme for the employees of the business.

Introduction:

Management is one of the important aspects in establishing a business. The overall

implementation plan is discussed in the organization and management study. This aspect
includes a study of the officers and key personnel, basic consideration informing the
organization, form of ownership, organizational chart and project schedule.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

The objective of the management aspect of a feasibility study is to determine the option
effectiveness of the organizational setup and the qualifications of the individuals who will
make up the organization

Moreover, the management aspect suggests a clear and precise identification of

duties and responsibilities, flow of authority and manpower level requirement. This
contains the organizational chart and the qualifications of the people involved the
formation of the business organization, structure.

Pre-Assessment:

1. Which of the following is true about Organizational Structure?

a. Identifies responsibilities for each position and the relationship among those
positions
b. Obligate the technical team to trust their leader in every job aspects
c. Quick decision making and bring managers complex problems to be solved using
conceptual thinking
d. Allow disobedient of hierarchical during emergency to ensure whole teams
benefits
2. Management team refers to
a. a group of individuals responsible to make sure the sales of the product hit
targeted value
b. a group of individuals responsible to evaluate the prowess or ability of its
technical team
c. a group of individuals responsible to bring a product/service idea to market
d. a group of individuals responsible to entertain and promote the product to ensure
customer's good feedbacks
3. All of the expenses involved in running a business on a day-to-day basis
a. Operating expenses
b. Bias
c. Profitability analysis
d. Organizational chart
4. A graphical representation of the flow of authority within an organization
a. Operating expenses
b. Organizational Chart
c. Acquisition
d. Logistics

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

5. Which are concerned to the meaning of "ORGANIZATION" (3 ANSWERS)

a. goal
b. place
c. people
d. management
e. activity

Lesson Presentation:

This chapter describes the form of business organization that is best suited for the
proposed subject, the organizational structure, the number of personnel needed, their
qualifications, their compensation,
and the projected time table before
the project is implemented.

The Management aspect is one of

the important aspects in
establishing a business. To
achieve this, management must be
able to plan all activities to become
productive and competitive in the
industry through human resource, financial capability, and new technologies. This
includes a study of officers and key personnel, basic consideration in forming the
organization, form of ownership, organizational chart and project schedule.

The main objective of this plan is to determine the option effectiveness of the
organization set-up.

Furthermore, the management is one of the important aspect in establishing a business.

It is the performance of conceiving and achieving desired results by means of group effort
consisting of utilizing human talents and resources.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Therefore, management is considered as the force that runs an enterprise and is

responsible for the success or failure of the business. The overall implementation plan is
discussed in the organization and management study.

What Is the Purpose of an Organizational/ Management Feasibility Study?

It is to define the legal and corporate structure of a business. An organizational feasibility

study may also include professional background information about the founders and
principals of the business and what skills they can contribute to the business.

The organizational feasibility study should include:

• Introduction
• Objectives of the study
• Description of your business structure/
Type of Organization
• Company Vision and Mission
• Company Logo
• Company Goals and objectives
• Key Business Operation
• Description of your organizational
structure
• Internal and external principles and practices of the business
• Professional skills and resumes/ Job descriptions
• Salaries and Benefits
• Recruitment Process
• Performance Appraisal
• Operating Hours and work Schedules
• GANTT Chart

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Description of One’s Business Structure

This section of the study contains a narrative description of the legal requirements for
establishing the business and why this is the right structure for your business. Here, the
pros and cons are discussed and the alternative business structures.

For example, a sole proprietorship leaves the sole proprietor open to both financial and
legal liability risks. A high-risk business should never be set up as a sole proprietorship
because it will make it difficult to attract investors as well as clients and customers. It is
also the hardest and most expensive form of business to insure.

You will need to decide if your organization should be a membership or non-membership

organization.

4 Types of Business Organization

1. Single proprietorship
2. Partnership
3. Corporation
4. Cooperatives Organizational
Structure

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

What Is a Sole Proprietorship?

A sole proprietorship also referred to as a sole trader or a proprietorship, is an

unincorporated business that has just one owner who pays personal income tax on profits
earned from the business.

A sole proprietorship is the easiest type of business to establish or take apart, due to a
lack of government regulation. As such, these types of businesses are very popular
among sole owners of businesses, individual self-contractors, and consultants. Many sole
proprietors do business under their own names because creating a separate business or
trade name isn't necessary.

Understanding Sole Proprietorship

A sole proprietorship is very different from corporations (corp.), limited liability

companies (LLCs), or limited liability partnerships (LLPs), in that no separate legal entity
is created. As a result, the business owner of a sole proprietorship is not exempt from
liabilities incurred by the entity.

For example, the debts of the sole proprietorship are also the debts of the owner.
However, the profits of the sole proprietorship are also the profits of the owner, as all
profits flow directly to the business's owner.

The main benefits of the sole proprietorship are the pass-through tax advantage
mentioned before, the ease of creation, and the low fees of creation and maintenance.
The disadvantages of a sole proprietorship are the unlimited liability that goes beyond the
business to the owner, and the difficulty in getting capital funding, specifically through
established channels, such as issuing equity and obtaining bank loans or lines of credit.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

KEY TAKEAWAYS

• A sole proprietorship is an unincorporated business with only one owner who pays
personal income tax on profits earned.
• Sole proprietorships are easy to establish and dismantle, due to a lack of
government involvement, making them popular with small business owners and
contractors.
• Many sole proprietorships end up getting restructured into an LLC, in sync with the
company's expansion.

What Is a Partnership?

A partnership is a formal arrangement by two or more parties to manage and operate a

business and share its profits.

There are several types of partnership arrangements. In particular, in a partnership

business, all partners share liabilities and profits equally, while in others, partners may
have limited liability. There also is the so-called "silent partner," in which one party is not
involved in the day-to-day operations of the business.

KEY TAKEAWAYS

A partnership is an arrangement between two or more people to oversee business

operations and share its profits and liabilities.

In a general partnership company, all members share both profits and liabilities.

Professionals like doctors and lawyers often form a limited liability partnership.

There may be tax benefits to a partnership compared to a corporation.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Organizational Structure

Discuss your business’ organizational

structure. One of the best ways to
present this information is with
an organizational chart. An
organizational chart shows the hierarchy
or chain of command in your business. It
lists key positions and subordinate
positions under department heads,
supervisors, and managers.

Organizational structure refers to how

various task are divided, resources are deployed and how units/departments are
coordinated in an organization. An organizational structure includes a set of formal tasks
assigned to individual and departments, formal reporting relationship, and a design to
ensure effective coordination of employees across departments/units with the help of
authority, reliability, responsibility and accountability, which are fundamental to
developing organizational structures and workflow based on their clear understanding by
all employees.

In discussing organizational structure, the following principles are important:

Authority – Is the right to make decisions, issue orders and allocate resources to achieve
desired outcomes. This power is granted to individuals (possibly by the position) so that
they can make full decisions.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Reliability – Is the degree to which the project team member can be dependent on to
ensure the success of the project with a sound and consistent effort.

Responsibility – This is an obligation incurred by individuals in their roles in the formal

organization effectively perform assignments or to work on the success of the project with
or without guidance or authorization.

Accountability – The extent to which an individual or project team is answerable to the

project stakeholders and provides visible evidence of action.

(Accountability = authority + responsibility.)

Authority and responsibility can be delegated to lower levels in the organization, whereas
accountability usually rest with the individual. Yet many executives refuse to delegate and
argue that an individual can have total accountability just through responsibility.

Principles and Practices of the Business

Every business should have a published code of ethics and principals that govern how
the company conducts its business. In this section, include both internal and external
principals of operations. You may also want to include policies related to anti-money
laundering and sexual harassment claims.

Internal Operations Business Principles and Practices

• Businesses that are incorporated must have a board of directors. Do you have a
conflict of interest policy in place?
• Do you offer services where clients need to be screened for eligibility for financial
aid or social services or are there other prerequisite requirements such as being a
senior citizen, minority, or disabled?

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

• Do you have hiring and employee training and management practices in place?
• Do you have an overall corporate philosophy or work culture that inspires,
encourages, or offers incentives to employees?
• Do you have an anti-discrimination policy in place?

External Business Practices and Principles

Do you have a customer policy or philosophy? Examples of client/customer

philosophies include:

• We do not serve clients; we team with clients to meet their goals.

• We value creativity and imagination and use these to our client’s advantage.
• Our employees maintain high ethical standards that reflect on how we treat our
clients.

Professional Skills and Resumes

A business’s strengths come from the talent, skills, and experience of those running the
company. In this section, you give a brief overview of all founders, employees, and
partners involved in the business that will be contributing their skills and input into how
the business is operated. You should also include any board members, directors, and
officers.

Include in your list of principals (most important people in your business or organization)
a brief overview of how their particular skills will serve the business. You can also include
accomplishments that relate to the business. It is also beneficial to attach resumes for at
least the top three principals listed.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Generalization:

Management in all business areas and organizational activities are the acts of getting
people together to accomplish desired goals and objectives efficiently and effectively.
Management compromises planning, organizing, staffing, leading or directing, and
controlling an organization or a group of one or more people in effort for the purpose of
accomplishing a goal. Resourcing encompasses the deployment and manipulation of
human resources, financial resources, technological resources, and natural resources.

In-Class Chapter Assignment:

1. Prepare and submit the Management and Organization Plan (1.5, 12 pt. Arial).

2. Organize a brainstorming with your group mates and start doing the following for the
Management study. Group presentation will be presented next meeting. You will be
sending your Management study on the google drive link that will be sent to you in your
class GC.

• Introduction
• Objectives of the study
• Description of your business structure/ Type of Organization
• Company Vision and Mission
• Company Logo
• Company Goals and objectives
• Key Business Operation
• Description of your organizational structure
• Internal and external principles and practices of the business
• Professional skills and resumes/ Job descriptions
• Salaries and Benefits
• Recruitment Process
• Performance Appraisal
• Operating Hours and work Schedules
• GANTT Chart

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

Week 6-8

Chapter 3

Technical Study

Objectives:

1. Enumerate the key steps in technical

analysis and modify the process
accordingly to suit the requirements for a
specific project and carry out technical
analysis for project in a prescribed
manner.

2. Determine the basic technical

requirements of the project such as size,
location, technology, and timing that will
best meet the intent of the project.

Introduction:

A feasibility study is an evaluation of the practicality of an intended project. The technical

aspect of a feasibility study helps you determine the efficacy of your proposed project by
examining the details of your intended process, including materials and labor, logistics
and technology related to producing, delivering and tracking the products or services you
intend to develop.

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 Dr. Filemon C. Aguilar Memorial College of Las Piñas
Golden Gate Subdivision, Talon III, Las Piñas City

A technical feasibility study can provide relevant context to the different aspects of your
project and serve as a great planning tool by providing an overhead view of how your
project can evolve during the course of its development, troubleshooting and tracking the
progress of your project from concept to reality.

Pre-Assessment:

K-W-L Chart

Fill in the details ahead of time and let’s have a discussion before we start our
class.

What I know What I want to learn What I learned

Lesson Presentation:

A business is considered technically and operationally feasible if it has the necessary

expertise, infrastructure and capital to develop, install, operate and maintain the proposed
system, and that by establishing such a system, the business will be able to deliver goods
or services at a profit.

When considering a new business, it is important to consider if there is sufficient access

to resources. One of the primary reasons that new business fails is under-capitalization -
not enough money to keep the business going from startup until it starts to make profit.

In addition, this assessment focuses on the technical resources available to the

organization. It helps organizations determine whether the technical resources meet
capacity and whether the technical team is capable of converting the ideas into working
systems. This can lead to a lack of resources.

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Golden Gate Subdivision, Talon III, Las Piñas City

How to Conduct a Technical Feasibility Study

Follow these steps to begin your technical feasibility study:

• Introduction
• Objectives of the study
• Technical Production Description
• Product Prototype
• Production Process
• Production Schedule
• Machinery and Equipment
• Plant Location and Lay out
• Building/Office/Plant
• Raw materials Requirement
• Packaging
• Production Supplies and Inventory
• Office Supplies
• Furniture and Fixtures
• Utilities needed
• Quality and Safety Measures
• Waste Disposal System

The technical study discusses how the products are to be produced, when these products
are to be produced, how much will it cost to produce the products, where to produce the
products and what technology to be used.

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Production Process/Process Flow

The production process discusses how the products will be produced, specifying each
step that will be involved, and the time involved.

Furthermore, the production process discusses how the products will be produced,
specifying each step that will be involved, and the time involved. The said steps will be
shown in a process flow chart where some of the following symbols will be used.

The selected manufacturing/production process must be described simply & clearly,

preferably with the aid of flow charts and diagrams. The alternative processes & the way
they compare with the chosen process must be mentioned. The analysis should further
touch on the manufacturing/production processes used in existing businesses with the
same or similar activity, both domestic & foreign, the licensing agreements & patents
should also be reviewed

Transportation Storage Operation Inspection Delay Equipment, Machinery,

Furniture and Fixtures

This part discusses or describes the technology that will be used– manual, mechanical,
automated, or robotics. If production process is done manually, then the use of
equipment, machinery, furniture and fixture will be limited. However, the student will still
make a list of all the needed equipment, and other facilities.

The list should include the description, the specification, and the prices of the listed
assets. If it is mechanical, automated, or robotics, the student will also do the same.

Building – It should determine whether it is necessary to put up, to rent, or to lease a

building. If a building is to be constructed, he should provide a computation for the cost
of the building. This includes the determination of the life of the building as well as the
depreciation method to be used.

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If the proponents propose to rent a building, he should determine the historical and the
current rent so that he will be able to project the rentals. When it is necessary to renovate
the building to fit the requirements of the production process, the cost of renovation should
likewise be included.

Things to consider:

1. What are possible locations for the facility (office/manufacturing plant)?

2. What size facility is needed?

3. What are the costs involved in the building?

4. Do you need to fit it out?

5. How much will it cost to get all necessary utilities connected?

6. Does the proposed location have adequate access to infrastructure and services such
as highways, railway and utilities?

7. Will you need to build your own facility, or purchase an existing one?

8. Where will the facility be located in relation to your customers?

9. Who will be responsible for transport of goods between the facility and the market?

10. What are the costs involved?

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Machinery & Equipment

Identify and individually list according to

type & use, specifications, capacities &
costs must be described in detail, the
origin of the machinery & equipment,
whether local or imported, the manner of
& cost of transporting them must be
indicated, what type of equipment and
technology will the business need to
produce its product/service?

What costs are involved to purchase and

set up the equipment? What are the costs involved in the ongoing running of the
equipment?

The equipment suppliers:

Who are the potential suppliers of the equipment?

Where are they located?

What sort of service and warranties do they provide?

How long will it take to acquire the equipment and begin operations?

Location

The proponent is required to gather maps in order to show where the proposed project
will be located. In the discussion, the proponent should also describe the distance of the
proposed project from its competitors as well as its supply of raw materials, public
markets, roads, communication facilities. The proponent need to discuss also the
environmental conditions of the place whether it be rural, urban, or near schools.

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A thorough & comparative analysis for each potential location should be made to
determine the most ideal site, it has to consider the following factors:

• the accessibility to, & availability of, raw material source

• the availability of cheap or moderately-priced utilities such as power, water, or fuel
• the combined cost of transporting raw materials &fuel to the site
• the proximity to distributing outlets
• the availability of skilled & unskilled labor
• the maps & charts of the proposed site must be included

Layout/Floor Plan

This topic specifically discusses how the

place (factory, store, or office) looks like and
how it is arranged. It is recommended that the
student presents the drawings including
dimensions so that readers could easily
visualize how the proposed venture will be.
Layout/Floor Plan – this topic specifically
discusses how the place (factory, store or
office) looks like and how it is arranged. It is
recommended that the student presents the
drawings including dimensions so that readers could easily visualize how the proposed
venture will be.

The layout should be clearly depicted through diagrams & descriptions. A good layout is
characterized by minimum material handling, effective space utilization, smooth work
flow, safe & conducive working area for the workers, safety and sanitation facilities, &
flexibility of arrangements

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Raw materials & Supplies

The required raw materials should be listed down and the basis for their selection must
presented. The descriptions and specifications on their physical, mechanical, and
chemical properties must also be given, the current and prospective cost of raw materials,
the availability and continuity of supply, and the current prospective sources should also
be included, and the volume required at various phases of operations must be clearly
presented.

Capacity/Scheduling

After describing the location, layout,

building, equipment, machineries, furniture
and fixture can now discuss its capacity.
The proponent should be able to determine
the maximum capacity, the production
schedule, the number of shifts per day,
number of working hours per day, etc.

Things to consider in the production schedules;

• minimum & maximum rated capacity,

• fixed costs, actual capacity utilization
• the number of shifts per day
• number of operating days per year

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Waste Disposal

There are some processes that produce unhealthful wastes. Here, the proponent should
discuss how to dispose the wastes and also the cost of disposing.

A description of the quantity, manner of disposal, and the cost involved in doing away
with expected waste from production is necessary, the analysis must be expanded to
consider the possibilities of further using these wastes.

Utilities and Other Operating Costs

This part describes the amount, cost, and sources of utilities-fuel, water, and electricity.
It also includes other costs that the proposed project will incur like supplies, telephone,
telex, maintenance, repairs, insurance, taxes, licenses, and SSS contribution. The
provision foreseen costs such as miscellaneous cost and contingencies is also included.
The utilities must be determined in relation to the production schedule and capacity
utilization defined. alternative sources of these utilities and the feasibility of their use must
also be described.

Production Costs

It includes the initial raw material costs, labor costs, operating costs, and other costs, and
other costs to produce the product.

Generalization:

Don't rely strictly on feasibility study conclusions to impress an investor. An experienced

investor or lending institution will read the entire report and come to their conclusions. It's
therefore critical that the technical and financial data in the study reconcile. If other parts
of the feasibility study show growth, one has to project labor and other costs and the
technical ability to support that growth.

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Golden Gate Subdivision, Talon III, Las Piñas City

The technical component should serve as the written explanation of the financial data
because it offers a place to include detailed information as to why an expense has been
projected high or low. The technical study can explain why it's even necessary.

Having a great idea for a product or business isn't enough—the proponent has to show
how the investors can make money from it. The technical feasibility study addresses the
physical and logistical mechanics of it, and how one will be able to get something into
the product and back out the door to customers.

In-Class Chapter Assignment:

1. Brainstorm and discuss your business Technical Study

2. Submit it in the google drive that will be provided to you.

3. (1.5, 12 pt. Arial)

Supplemental Online References:

https://www.indeed.com/recruitment/c/info/conducting-a-technical-feasibility-
study

https://www.youtube.com/watch?v=DaaOfI7qKok

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Golden Gate Subdivision, Talon III, Las Piñas City

Week 10-13

Chapter 4

Marketing Study

Objectives:

1. Enumerate the critical steps in conducting a

market analysis and carry out the market analysis
for a project in a prescribed manner.
2. Know the difference between the Market
feasibility study and the form a Marketing Plan and
marketing research.
3. Identify the goals of Market Study.
4. Categorize the Market feasibility study stages
5. To undertake the analysis, planning and
formulation of workable marketing programs, product mix strategy, marketing mix and
marketing organization that can effectively inform, motivate and service the markets.

Introduction:

Once the idea has been validated by assessing the legal validity of the project; the next
step is preparing the market feasibility study.

Market feasibility studies help identify market competition, potential markets, and market
analysis to assess a business idea. They are valuable for anyone looking to start a
business.

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It is used to determine the extent to which the goods/ services be generated by the project
are needed or demanded and to design the appropriate marketing strategies and plans
that will help ensure that the project’s outputs will reach and be accepted by the target
users.

Market feasibility study is considered to be the most important study of the detailed
studies. This study is essential to the rest of the feasibility studies, without having a market
study it’s difficult to go for further studies of the detailed feasibility study

Pre-Assessment:

Open-Ended Questions – An open ended question will be asked among the students
about their opinions and thoughts about Marketing study.

Lesson Presentation:

The Marketing Aspect is said to be the lifeblood of

all feasibility studies. This chapter seeks to determine
the opportunities and threats, the target market, the
total demand and supply of the product, the competition
and the marketing program which refers to the product,
price, place and promotional strategies.

What is a Marketing Study?

It is the process of perceiving, understanding,

stimulating, and satisfying the customer needs, wants
and expectations through the goods and services of specially selected
target market which is better than the competitors. The process of the business to build
strong customer relationship in order to gain loyalty from them.

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How a Market Feasibility Study Differs from a Marketing Plan?

Feasibility studies are done on ideas, campaigns, products, processes, and entire
businesses, and they look at how things work, if they will work, and if there are potential
problems. Feasibility studies are assessment
tools, not just reports to try and sell your
business to investors. They should consider
both the pros and cons and analyze a variety
of potential business scenarios.

A marketing plan maps out specific ideas,

strategies, and campaigns based on feasibility
study investigations and are intended to be
implemented.

Think of market feasibility studies as a logistical study, and a marketing plan as a specific,
planned course of action to take.

A proponent cannot continue further Steps or process if the result of the market feasibility
study is negative, but there are other choices to follows:

1. Modify market study broadened to include other market elements were not included in
the study previously (e.g. find other markets were not included in the study to increase
sales and thus increase cash flow).

2. Find any other investment alternatives to find a new project. That market study
prepared to achieve and assure, some of the main objectives of the project, which cannot
start without specifying these goals confining it broadly.

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The Difference Between Market Study and Marketing Research

• Market research is any organized effort to gather information about target markets
or customers. It is a very important component of feasibility study.
• Market research is one of the key factors used in maintaining competitiveness over
competitors.

* Market research provides important information to identify and analyze the market
need, market size and competition. Market-research techniques encompass both
qualitative techniques such as focus groups and in-depth interviews, as well as
quantitative techniques such as customer surveys, and analysis of secondary data.

• Marketing research is "the process or set of processes that links the producers,
customers, and end users to the marketer through information — information used to
identify and define marketing opportunities and problems; generate, refine, and evaluate
marketing actions; monitor marketing performance; and improve understanding of
marketing as a process

Goals for Market Study:

• Determine the market structure and shape.

• Determine exact demand for product. (to get the demand of the project, the
proponents must conduct a survey to gather information, to determine the sample
size, the proponents need to use the slovin’s formula in which the sample size will
represent the whole population of the target location.

The Slovin's Formula is given as follows:

n = N/(1+Ne2),

where n is the sample size, N is the population size and e is the margin of error to be
decided by the researcher.

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Formula for distribution of questionnaires

Sample size/Total Population x number of population per street or place = number of

distribution of questionnaires.

• Identify the factors affecting the market demand and supply.

• Identify market targeted groups, and market segments.

• Selecting the price policy and the best price mechanism to sell the products.

Important Questions for The Market Study(MS):

In this context, several questions to be asked,

1. what is the main purpose to study the market?

2. What you are going to sell? (Why this product not the other? How can you be sure
about what you are proposing?) Make no definite statement unless you can back it up!

3. Who are your customers?

4. (Why them? What makes you so sure of this?)

5. How will you operate and how will you sell your product?

6. Why this way and not another? How can you back that up?)

7. How much: What is the estimated level of sales?

8. What makes you expect to meet this forecasted level of sales turnover?

9. What evidence is there to prove that this is a realistic estimation and can be achived?

10. Whereabouts (area & site) What are your reasons for thinking this is the ideal location,
particularly if you are counting on a local customer base?

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What Does a Marketing Feasibility Study Contain?

• Introduction
• Objectives of the Study
• Market Description/ Target Market Profile
• SWOT Analysis
• Plan of Distribution
• Market Segmentation
• Demand Analysis (Historical Demand Data and Projected Demand Data)
• Supply Analysis (Historical Supply Data and Projected Supply Data)
• Demand and supply Gap and Analysis
• Competitive Edge
• Current Market Condition
• List of Competitors and their Products and Prices
• Proposed Marketing Strategies
• Positioning strategy
• Pricing
• Unique Selling
• Sales Strategy
• Future Plans and strategic Opportunities
• Questionnaire survey

What is a Market Description?

It describes the targeted segments in detail and provides context for the marketing
strategies and detailed action programs.

Before a proponent begin any sales and marketing functions one should develop a
strong knowledge of the market by preparing a market description.

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It is the opportunity to get particular about the following:

• Who actually will be interested in your service or product?

• What is the size of the market?
• What are their ages?
• Where do they live?
• What gender are they?

The more details you get, the better will be your result.

A Market Description can be broken down in the following way:

• Demographics: It includes the demographic features of your market such as age,

race, gender, family structure, educational level, occupation, and income level.
Companies do online research by considering Census and other numbers for
adding specific figures here.
• Geographical location: You should consider where the target markets live. Are
they in the suburbs or cities, a specific state, city, or region? You can enrich this
portion by adding detailed statistics regarding the number of probable customers
in a rural community or geographic market or can be all of the mentioned above.
Is the service or product available only to the individuals living in a specific state,
region, or city?
• Psychographics: Here you will describe the personality traits or psychology of
your market, like what are their initial attitudes and beliefs? What do they require
more? Understanding your customers from a psychographic viewpoint will be
definitely fruitful because here you begin finding out the way to best market your
concept.

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• Consumer Nature: You should understand the nature or characteristics of the

consumers such as how does the target market purchase or use services or
products? Do they shop physically or online? Are they concerned about brand
loyalty? How often do they shop for the services or products you are offering?
• Market Needs: Finally, the market description needs to clearly mention WHY the
target market needs the service or product you have decided to sell. Here you can
clearly figure out a need among your potential customer, a gap in the present
business climate, and describe how your idea or product will meet that need
among the target market.

What is a SWOT Analysis?

SWOT stands for Strengths,

Weaknesses, Opportunities, and
Threats, and so a SWOT
Analysis is a technique for
assessing these four aspects of
your business.

One can use SWOT Analysis to

make the most of what they got,
to the organization's best
advantage. And one can reduce
the chances of failure, by
understanding what one is
lacking, and eliminating hazards
that would otherwise catch the
proponent unaware.

Better still, one can start to craft a strategy that distinguishes the organization from its
competitors, and to compete successfully in your market.

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What is a Distribution Plan?

One of the sections of the marketing study should describe how the company intends
to distribute the products to the final customers. The various distribution channels differ
in costs, customer relationships, complexity and the resources required to operate the
channel. The company has to make sure the distribution channels it selects matches
and reinforces the goals and objectives of the marketing study.

Different Marketing Distribution

Direct-Selling Channels

Many businesses choose the direct-sales channel, because they have access to the
customer and keep all revenue under the control of the company. This distribution
approach let them do their market research and choose their own customers while setting
the selling price. The downside is that it takes a lot of time and focus away from their main
preoccupation: the production of high-quality goods. Direct selling is a good match for a
marketing plan that has identified, researched and segmented the final customers.

Using Wholesale Partners

When a company have difficulties establishing who their retail customers will be and don't
have time to go out and sell, their marketing plan can focus on wholesale distribution.
This choice is especially valid if their potential customers are widely dispersed or located
far from their facilities. Wholesale distribution leaves the selling to wholesalers and
retailers specialized in retail sales. Because they have the sales costs, they may receive
only a portion of the final sales price, but they can focus on manufacturing the best product
at the lowest cost.

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Mail Order Options

Mail order is a low-cost distribution channel that is convenient for the customer. The
company can use mail order by buying mailing lists or placing ads in a suitable
publication. If they send out material to a mailing list, they need fliers and other
materials. The mailing list has to target the demographic groups that they expect will
buy their products, as described in their marketing plan. With time, they can create their
own mailing lists complete with customer profiles and preferences.

Online Distribution Channels

Digital marketing has created a variety of distribution channels that are disruptive to the
traditional ways of selling.

For example, home food delivery services like Jollibee, Mc Donald’s and the like. These
fast-food chains have opened new distribution channels, making those that used them
more competitive.

Online selling via e-commerce stores features disintermediation, or the removal of

intermediaries, while still reaching large groups of potential customers. Cutting out the
middle man while retaining the ability to sell to a broadly-based market makes online
sales particularly attractive. In some cases, using intermediaries like Amazon can
increase your sales so much, their fees are worth it.

Harnessing social media accounts, online ad campaigns and message boards to spread
the word, they can achieve substantial sales volumes quickly. Their marketing plan has
to have an overall strategy, because online sales can suffer from instability and large
variations unless there is a strategic direction to keep potential customers engaged.

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What is Market Segmentation?

Market segmentation is the research that determines how your organisation divides its
customers or cohort into smaller groups based on characteristics such as, age, income,
personality traits or behaviour. These segments can later be used to optimise products
and advertising to different customers.

At its core, market segmentation is the practice of dividing your target market into
approachable groups. Market segmentation creates subsets of a market based on
demographics, needs, priorities, common interests, and other psychographic or
behavioral criteria used to better understand the target audience.

By understanding your market segments, you can leverage this targeting in product,
sales, and marketing strategies. Creating your marketing communications both in ad
messaging and advanced targeting on digital platforms like Facebook and Google using
your segmentation will allow for better response rates and lower acquisition costs. Market
segments can power your product development cycles by informing how you create
product offerings for different segments like men vs women or high income vs low income.

Types of Market Segmentation

Geographic Segmentation

While typically a subset of demographics,

geographic segmentation is typically the
easiest. Geographic segmentation creates
different target customer groups based on
geographical boundaries. Because potential
customers have needs, preferences, and
interests that differ according to their
geographies, understanding the climates and

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geographic regions of customer groups can help determine where to sell and advertise,
as well as where to expand your business.

Demographic Segmentation

Demographic segmentation sorts a market by demographic elements such as age,

education, income, family size, race, gender, occupation, nationality, and more.
Demographic segmentation is one of the simplest and most commonly used forms of
segmentation because the products and services we buy, how we use those products,
and how much we are willing to spend on them is most often based on demographic
factors.

Firmographic Segmentation

Firmographic segmentation is similar to demographic segmentation. The difference is that

demographics look at individuals while firmographics looks at organizations.

Firmographic segmentation would take into consideration things like company size,
number of employees and would illustrate how addressing a small business would differ
from addressing an enterprise corporation.

Behavioral Segmentation

Behavioral segmentation divides markets by behaviors and decision-making patterns

such as purchase, consumption, lifestyle, and usage. For instance, younger buyers may
tend to purchase body wash, while older consumer groups may lean towards soap bars.
Segmenting markets based off purchase behaviors enables marketers to develop a more
targeted approach.

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Golden Gate Subdivision, Talon III, Las Piñas City

Psychographic Segmentation

Psychographic segmentation takes into account the psychological aspects of consumer

behavior by dividing markets according to lifestyle, personality traits, values, opinions,
and interests of consumers. Large markets like the fitness market use psychographic
segmentation when they sort their customers into categories of people who care about
healthy living and exercise.

KEY TAKEAWAYS

• A market segment is a group of people in a homogeneous market who share

common marketable characteristics.
• The criteria for a market segment are that there is homogeneity among the
segment's main needs, the segment must be unique, and the segment's members
must produce a common reaction to marketing tactics.
• Common market segment traits include interests, lifestyle, age, and gender.

What is Demand analysis?

It is the process of understanding the customer demand for a product or service in a target
market. Companies use demand analysis techniques to determine if they can
successfully enter a market and generate expected profits to expand their business
operations. It also gives a better understanding of the high-demand markets for the
company’s offerings, using which businesses can determine the viability of investing in
each of these markets.

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Steps in Market Demand Analysis

Market identification

One of the first steps in market demand is to identify the target market for the company’s
products or services. Surveys or customer feedbacks can be leveraged to determine the
current customer satisfaction levels. Any comments indicating dissatisfaction can be
taken into consideration for planning improvements that will eventually enhance customer
satisfaction.

Business cycle

After identifying the potential markets, the next step is to assess the stage of the business
cycle that each market is undergoing. A business cycle ideally comprises of three stages:
emerging, plateau and declining. Markets that are in the emerging stage show higher
consumer demand and low supply of current products or services. The plateau stage
depicts the break-even level of the market, where the supply of goods meets the
current market demand. A declining stage indicates lagging consumer demand for the
company’s goods or services.

Product Position

Once the market and their respective business cycles have been reviewed, companies
must develop products or tailor their services to meet a specific niche in the market.
Products must be differentiated from the peers in the market so that they meet the specific
needs of consumers, and thereby create higher demand for the company’s goods or
services.

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Evaluate competition

A crucial factor of demand analysis is determining the number of competitors in the market
and their current market share. Markets in the emerging stage of the business cycle tend
to have fewer competitors. This translates to a higher profit margin for your company.

What is a Supply Analysis?

Supply Analysis is a research and analysis done to understand the supply trends and
responses to changing market and production variables. Supply Analysis takes into
account the production costs, raw material costs, technology, labour wages etc. The
analysis helps the manufacturers and companies to understand the impact of these
variables on supply and eventually demand.

The goal of demand-supply chain is to make sure that the supply and demand work
properly. The demand should be met and supply should not be more than what expected.
There are lot of variables which are considered in demand analysis and supply analysis.

Importance of Supply Analysis

Supply Analysis helps manufacturers to analyze the impact of production changes,

policies on increase or decrease in supply of finished goods. e.g. newer upcoming
technology can help produce more goods in same amount of time.

The analysis can help determine if this new technology should be adopted or not. Also if
this technology can help produce more, is the demand there for more products. What
impact will it have on the current labor and how would be it impact supply in the market.

Another example can be impact of increase in wages in the market on supply. The labor
cost would go up and it will drive the costs of product along with it. If the supply has to be
kept constant, the costs would go up and if costs have to be kept constant the supply
would go down hence driving the prices up if the demand is unchanged. These are some
questions which the supply analysis tries to answer.

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Supply Analysis Parameters

Some of the key parameters which

determine supply are:

1. Product's own price

2. Input prices

3. Technology

4. Expectations of the market

5. Number of producers’ present

What is Demand and Supply Gap analysis?

The 'gap' refers to the difference

between the supply and demand for
that product. In other words, it
means a consumer-need that
supply has not yet met. For
companies, a gap in the market
represents an opportunity for it to
widen its customer base.

A gap in the market is an

opportunity to make and sell
something that is not available yet.
However, consumers would like to have it.

For companies, a gap in the market represents an opportunity for it to widen its customer
base. You can achieve market penetration by identifying a gap in the market and filling it.

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Gap in the market attributes

A gap in the market has at least one of the following attributes.

• It is something original. In other words, it is new; there is nothing like it in the

market.
• It already exists. However, an upgrade or improvement would boost sales
significantly.
• The product already exists. However, nobody has tried to sell it in a new market.
Introducing it to a new market would increase sales considerably.

How do you close the gap?

Firms may be able to close, or reduce, their gaps by reconsidering their offerings. A
gasoline station that offers an "average" level of service at prices higher than those of
self-service stations might either target the low cost segment, lowering prices and cutting
costs, or targeting a premium service and "beefing up" service. Similarly, a firm that faces
a segmented market might "branch off" into different units that offer different levels of
service to different customers. For example, Toyota started the Lexus division for
consumers who demanded more service than would have been cost effective to offer to
its traditional customers. On the supply side, closing gaps mostly involves improving
efficiency and/or reducing costs in other ways. Alternatively, existing channels may be
reassessed—e.g., airlines have deemphasized travel agents.

What is positioning strategy?

Positioning is a marketing strategy, also referred to as product positioning, which refers

to how a brand wants to be perceived in the mind of customers relative to competing
brands. The objective of a positioning strategy is to establish a single defining
characteristic of a brand in the mind of the consumer.

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Effective positioning strategies consider the strengths and weaknesses of the

organization, the needs of the customer and the claims of competitors. Product
positioning allows a company or brand to illuminate areas where it can eclipse the
competition.

The 3 keys of strategic positioning

Creating an image and shaping how a brand is viewed by consumers is a very purposeful
and meticulous act. Background research and an understanding of the market are crucial
to your brand's success. Product positioning begins well before the creation of brand
identity and is crucial to branding.

The three keys to strategic positioning are often referred to as the three "C's":

1. Customer: Central to positioning is knowing your focus by identifying what the

buyer wants and needs. Research to see if there is a problem customers need a
solution for and what needs they might report via surveys, interviews and reviews.
Listening to buyer needs and placing a high importance on those needs is pivotal
in getting customer attention and loyalty.

2. Channel: Your channel, or sales team, is central to understanding customer needs

and is where you will likely find the majority of information for successful positioning.
Your channel is a direct connection to the customer, and through their experience,
you can get information such as the customer profile, customer problems,
competitive intelligence and the purchase process. With experience in the entire
sales cycle, channels will help you identify brand strength to effectively focus your
positioning strategy on what you do well as a brand.

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3. Competition: A final step in formulating a product position is paying attention to

your competition and their position. If yours is unique and easily differentiated from
what is on the market, then your positioning statement (your assertion of brand
uniqueness) is effective.

Seven Types of Positioning Strategies

There are several different routes to take when employing positioning strategies. Although
there often needs to be a central one, it is effective to use several in unison. This method
allows for greater market reach and helps to inform the customers through different
modes. The seven basic types of positioning strategies are:

1. Product characteristics or consumer benefits: In using this strategy for

positioning, the focus is on quality. It addresses the brand's durability, dependability
or reliability and style. An example of positioning based on characteristics is when
toothpaste companies refer to the product as "refreshing" or "cavity fighting." A
slogan like "stronger than steel" communicates strength and reliability in a market
where similar products exist but are differentiated through consistency of product
characteristics.
2. Pricing: This positioning strategy focuses on the relationship between price and
quality and the consumer's perception of the value of a product. In comparing jacket
prices, a buyer might assume that a jacket higher in price is higher in quality.
Conversely, a lower-priced product will position for affordability. Designer jeans
boast quality because of price, while department store jeans are accessible to all.
3. Use or application: When a brand reaches a larger market or changes the
purpose of the brand or product, positioning based on use is functioning. For
example, a company that advertises its hot tea during colder seasons begins to
advertise an iced version during the summer to alter its brand's use to reach a larger
market through modifying applications.

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Tape or adhesives often used for home repairs can reposition the brand for
decorative or craft projects. Widening the reach accesses a different type of
customer.

4. Product process: This is when a brand is associated with a specific user or class
of users. Endorsements by famous personalities or product influencers are
examples. The athleticism exhibited by basketball players who wear specific
sneaker brands is expected to be associated with the brand in consumers' minds.
In purchasing that brand, the expectation is that all who wear it will be as athletic.
Another example is a shampoo once specifically marketed only for babies might
change the application to be used by people with sensitive hair or scalps too.
Repositioning based on the application will help a brand that is already positioned
to expand by sharing the market.
5. Product class: This consists of positioning two related products in the same
product class simultaneously, resulting in an increased customer base. By
positioning dried milk as both a breakfast substitute and a protein shake, the appeal
is doubled to two different customer needs.
6. Cultural symbols: The objective in positioning based on a cultural symbol is to
identify something like a symbol very meaningful to people that have not been used
by competitors and harness it to associate your brand with that symbol. Airlines
have done this with cultural symbols to associate with royal treatment.
7. Competitors (relation to): Using competitors as a frame of reference to
differentiate a brand is another type of positioning. Positioning your brand against
competitors is an obvious challenge on quality and asserts that your brand is
superior with a competitive edge.

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For example, one chicken-based fast food restaurant boasts a bovine mascot who
encourages customers to eat chicken, being aware that most other fast-food chains
market beef burgers. Positioning in relation to or against competitors inferentially
acknowledges similarities but focuses on the differences, thus spotlighting your
brand over the others.

Generalization:

Market Feasibility is all about how the real world market will be reacting towards a
particular development.

It is concerned with gaining the in depth knowledge and doing a deep analysis of real
estate market and knowing how the market is going to respond towards particular
project/product.

Moreover, market feasibility is investigating the target market and identifying the various
potential threats and the different ways to overcome them.

The various components Market Feasibility consist of Interviews with Stakeholders,

Demographic assessment and trend analysis, Quantitative surveys, In-depth assessment
of competitors and Different Demand Models.

In-Class Chapter Assignment:

1. Brainstorm and discuss your business Marketing Study

2. Do your survey questionnaire and present it next meeting

3. Submit it in the google drive that will be provided to you.

4. (1.5, 12 pt. Arial)

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Supplemental Online References

https://www.slideshare.net/jezielcamarillo/marketing-aspects-of-feasibility-study

https://everythingwhat.com/what-is-marketing-aspect-in-feasibility-study

https://studymoose.com/the-marketing-aspect-essay

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Week 14-15

Chapter 4

FINANCIAL STUDY

Objectives:

1. Understand the significance of the

financial feasibility study of projects and
the meaning of project financing.
2. Identify appropriate methods for
financial feasibility study and financial
evaluation of projects using different
methods.

Introduction:

Finance is a business function that uses numbers and analytical tools to help managers
make better decisions. Every business owner must learn at least basic finance
principles to effectively run his company. Finance helps management gain a clear
understanding of the company’s current financial position, particularly whether the
business is profitable or not. Companies of all sizes benefit from thorough financial
planning to guide the business steadily down the path to future growth. Financial
feasibility focuses specifically on the financial aspects of the study.

It assesses the economic viability of a proposed venture by evaluating the startup costs,
operating expenses, cash flow, and making a forecast of future performance. ... Preparing
a profit plan and making cash flow projections.

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Pre Assessment:

First and Final Thoughts

"Prior to beginning your study, ask students to share their initial thoughts regarding what

they are about to learn, what they are most compelled by, and where their personal

interests and needs might be best satisfied. Use this information to adjust the

instructional plan. Ask them to revisit and revise these statements at the end of the

learning experience in order to describe their levels of satisfaction"

Lesson Presentation:

A financial feasibility study, or FFS, should assess the viability of a project based on a
major pivotal component: will the project or business have enough cash to complete the
project (and generate a profit). One of the bottom lines of any business is whether a
company can sustain itself, pay its employees, and of course make a profit. A financial
study can help in this assessment.

Components of a Financial Study

• Introduction
• Objectives of the study
• Capital Expenditures
• Financial Statements
a. Projected Statement of financial position
b. Projected statement of Cash Flows
• Projected Balance Sheets
• Projected Cash Flow
• Projected Income statement
• Statement of Financial Position
• Financial Ratio (5 years)

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An economic or financial feasibility study is developed for companies that seek to

understand the amount of capital they need to procure to successfully start and complete
any given project. While a business plan may have a section called the “CBA” or cost-
benefit-analysis, in an economic feasibility study it will be greater in detail and have more
statistics and numbers in the financials.

Importance of a Financial Feasibility Study

There are many important factors that any feasibility study should address, and in the
financial or economic studies this is equally true.

A financial feasibility study can concentrate on a variety of projects or developments or

can focus one specific area or study. In any finance study, particularly if one is seeking to
raise capital from a bank or private backers, the basic minimum of any financial report
(and business plan as well) should be to cover the following:

▪ How much capital ones needs to begin the business;

▪ How much capital ones needs to operate the business;
▪ ROI or return on investment, i.e. when will investors see their money back with a return.

Why Write a Financial Feasibility Study?

Writing a financial feasibility study is good business practice, especially for companies
that are planning on raising many millions of dollars and want to have the knowledge
readily available to make an educated decision about a project’s viability. It is hard to
image a bank or investor infusing capital in a company raising tens of millions of dollars
that does not have such a report. By creating such a real estate financial study or for any
product study, for example, you will be able to navigate potential pitfalls during
development and save needed capital in the process, as well as possibly discover new
opportunities in the market.

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Benefits of Writing a Financial Study:

▪ Prepares the companies for up to date information regarding statistical information on
any project, i.e. market for products, real estate development, demographics, income
streams, etc.
▪ Creates a knowledge of how much capital, if any, is needed for the project’s launch
and success. Again, this can be for any business, high tech, real estate, oil, energy
etc.
▪ Helps with strategies. Since the financing needs are known this can help with
strategizing next moves or first mover advantage for new areas.
▪ Identifies areas for growth.
▪ Inspires confidence in the management team since obtaining the numbers can
strengthen a business and its leadership belief in the company’s success.
▪ Feasibility studies provide intelligence, statistics for the management team.

What are capital expenditures:

Capital expenditures (CapEx) are funds used by a

company to acquire, upgrade, and maintain physical
assets such as property, plants, buildings,
technology, or equipment. CapEx is often used to
undertake new projects or investments by a
company. Making capital expenditures on fixed
assets can include repairing a roof, purchasing a
piece of equipment, or building a new factory.
This type of financial expense is made by companies
to increase the scope of their operations or add some economic benefit to the operation.

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In addition, Capital expenditures are the investments that companies make to grow or
maintain their business operations. Unlike operating expenses, which recur consistently
from year to year, capital expenditures are less predictable. For example, a company that
buys expensive new equipment would account for that investment as a capital
expenditure. Accordingly, it would depreciate the cost of the equipment over the course
of its useful life.

Formula and Calculation of CapEx

CapEx=ΔPP&E+Current Depreciation

where:CapEx=Capital expendituresΔPP&E=Change in property, plant, and equipment

KEY TAKEAWAYS

• Capital expenditure (CapEx) is a payment for goods or services recorded—or

capitalized—on the balance sheet instead of expensed on the income statement.
• CapEx spending is important for companies to maintain existing property and
equipment, and invest in new technology and other assets for growth.
• If an item has a useful life of less than one year, it must be expensed on the income
statement rather than capitalized (i.e., cannot be considered CapEx).

What CapEx Can Tell You

CapEx can tell you how much a company is investing in existing and new fixed assets to
maintain or grow the business. Put differently, CapEx is any type of expense that a
company capitalizes, or shows on its balance sheet as an investment, rather than on its
income statement as an expenditure. Capitalizing an asset requires the company to
spread the cost of the expenditure over the useful life of the asset.

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The amount of capital expenditures a company is likely to have is

dependent on the industry. Some of the most capital-intensive industries have the highest
levels of capital expenditures including oil exploration and production, telecommunication,
manufacturing, and utility industries.

CapEx can be found in the cash flow from investing activities in a company's cash flow
statement. Different companies highlight CapEx in a number of ways, and an analyst or
investor may see it listed as capital spending, purchases of property, plant, and
equipment (PP&E), or acquisition expense.

You can also calculate capital expenditures by using data from a company's income
statement and balance sheet. On the income statement, find the amount of depreciation
expense recorded for the current period. On the balance sheet, locate the current period's
property, plant, and equipment (PP&E) line-item balance.

Locate the company's prior-period PP&E balance, and take the difference between the
two to find the change in the company's PP&E balance. Add the change in PP&E to the
current-period depreciation expense to arrive at the company's current-period CapEx
spending.

The Difference Between CapEx and Operating Expenses (OpEx)

Capital expenditure should not be confused with operating expenses (OpEx). Operating
expenses are shorter-term expenses required to meet the ongoing operational costs of
running a business. Unlike capital expenditures, operating expenses can be fully
deducted from the company's taxes in the same year in which the expenses occur.

In terms of accounting, an expense is considered to be CapEx when the asset is a newly

purchased capital asset or an investment that has a life of more than one year, or which
improves the useful life of an existing capital asset. If, however, the expense is one that
maintains the asset at its current condition, such as a repair, the cost is typically deducted
fully in the year the expense is incurred.

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Example of How to Use Capital Expenditures

Aside from analyzing a company's investment in its fixed assets, the CapEx metric is used
in several ratios for company analysis. The cash-flow-to-capital-expenditures (CF-to-
CapEx) ratio relates to a company's ability to acquire long term assets using free cash
flow. The CF-to-CapEx ratio will often fluctuate as businesses go through cycles of large
and small capital expenditures.

A ratio greater than 1 could mean that the company's operations are generating
the cash needed to fund its asset acquisitions. On the other hand, a low ratio may indicate
that the company is having issues with cash inflows and, hence, its purchase of capital
assets. A company with a ratio of less than one may need to borrow money to fund its
purchase of capital assets.

For example, Ford Motor Company, for the fiscal year ended 2016, had $7.46 billion in
capital expenditures, compared to Medtronic which purchased PPE worth $1.25 billion
for the same fiscal year.

CF-to-CapEx is calculated as follows:

CF/CapEx=CapExCash Flow from Operations

where:CF/CapEx=Cash flow to capital expenditure ratio

Using this formula, Ford Motor Company's CF-to-CapEx is as follows:

$ 14.51 Billion 1.94

$7.46 Billion

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It is important to note that this is an industry-specific ratio and should only be compared
to a ratio derived from another company that has similar CapEx requirements.

Capital expenditures are also used in calculating free cash flow to equity (FCFE). FCFE
is the amount of cash available to equity shareholders.

The formula FCFE is:

FCFE=EP−(CE−D)×(1−DR)−ΔC×(1−DR)
where:
FCFE=Free cash flow to equity
EP=Earnings per share
CE=CapEx
D=Depreciation
DR=Debt ratio
ΔC=ΔNet capital, change in net working capital

Or, alternatively, it can be calculated as:

FCFE=NI−NCE−ΔC+ND−DR
where:
NI=Net income
NCE=Net CapEx
ND=New debt
DR=Debt repayment

The greater the CapEx for a firm, the lower the FCFE.

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Are capital expenditures tax deductible?

Capital expenditures are not directly tax deductible. However, they can reduce a
company’s taxes indirectly by way of the depreciation that they generate. For example, if
a company purchases a $1 million piece of equipment that has a useful life of 10 years,
it could include $100,000 of depreciation expense each year for 10 years. This
depreciation would reduce the company’s pre-tax income by $100,000 per year, thereby
reducing their income taxes.

What is the difference between capital expenditures and operating expenses?

The key difference between capital expenditures and operating expenses is that
operating expenses recur on a regular and predictable basis, such as in the case of rent,
wages, and utility costs. Capital expenses, on the other hand, occur much less frequently
and with less regularity. Operating expenses are shown on the income statement and are
fully tax-deductible, whereas capital expenditures only reduce taxes through the
depreciation that they generate.

What Is Cash Flow?

Cash flow is the net amount of cash and cash equivalents being transferred into and out
of a business. Cash received represents inflows, while money spent represents outflows.

At a fundamental level, a company’s ability to create value for shareholders is determined

by its ability to generate positive cash flows or, more specifically, maximize long-term free
cash flow (FCF). FCF is the cash that a company generates from its normal business
operations after subtracting any money spent on capital expenditures (CapEx).

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KEY TAKEAWAYS

• Cash flows refer to the movements of money into and out of a business, typically
categorized as cash flows from operations, investing, and financing.
• Operating cash flow includes all cash generated by a company's main business
activities.
• Investing cash flow includes all purchases of capital assets and investments in
other business ventures.
• Financing cash flow includes all proceeds gained from issuing debt and equity as
well as payments made by the company.
• Free cash flow, a measure commonly used by analysts to assess a company's
profitability, represents the cash a company generates after costs.

Understanding Cash Flow

A business takes in money from sales as revenues and spends money on expenses. A
company may also receive income from interest, investments, royalties, and licensing
agreements and sell products on credit, expecting to actually receive the cash owed at a
late date.
Assessing the amounts, timing, and uncertainty of cash flows, along with where they
originate and where they go, is one of the most important objectives of financial reporting.
It is essential for assessing a company’s liquidity, flexibility, and overall financial
performance.

Positive cash flow indicates that a company's liquid assets are increasing, enabling it to
cover obligations, reinvest in its business, return money to shareholders, pay expenses,
and provide a buffer against future financial challenges. Companies with strong financial
flexibility can take advantage of profitable investments. They also fare better in
downturns, by avoiding the costs of financial distress.

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Cash flows can be analyzed using the cash flow statement, a standard financial statement
that reports on a company's sources and usage of cash over a specified time period.

Cash Flow Categories

1. Cash Flows from Operations (CFO)

CFO, or operating cash flow, describes money flows involved directly with the production
and sale of goods from ordinary operations. CFO indicates whether or not a company has
enough funds coming in to pay its bills or operating expenses. In other words, there must
be more operating cash inflows than cash outflows for a company to be financially viable
in the long term.

Operating cash flow is calculated by taking cash received from sales and subtracting
operating expenses that were paid in cash for the period. Operating cash flow is recorded
on a company's cash flow statement, which is reported both on a quarterly and annual
basis. Operating cash flow indicates whether a company can generate enough cash flow
to maintain and expand operations, but it can also indicate when a company may need
external financing for capital expansion.

Note that CFO is useful in segregating sales from cash received. If, for example, a
company generated a large sale from a client it would boost income and earnings.
However, the additional revenue doesn't necessarily improve cash flow if there is difficulty
collecting the payment from the customer.

2. Cash Flows from Investing (CFI)

CFI, or investing cash flow, reports how much cash has been generated or spent from
various investment-related activities in a specific period. Investing activities include
purchases of speculative assets, investments in securities, or the sale of securities or
assets.

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Negative cash flow from investing activities might be due to significant amounts of cash
being invested in the long-term health of the company, such as research and
development (R&D), and is not always a warning sign.

3. Cash Flows from Financing (CFF)

CFF, or financing cash flow, shows the net flows of cash that are used to fund the
company and its capital. Financing activities include transactions involving issuing debt,
equity, and paying dividends. Cash flow from financing activities provides investors with
insight into a company’s financial strength and how well a company's capital structure is
managed.

Statement of Cash Flows

There are three critical parts of a company's financial statements:

• Balance sheet, the balance sheet gives a one-time snapshot of a company's

assets and liabilities
• Income statement, the income statement indicates the business's profitability
during a certain period.
• Cash flow statement. The cash flow statement differs from the other financial
statements because it acts as a corporate checkbook that reconciles the other two
statements. The cash flow statement records the company's cash transactions (the
inflows and outflows) during the given period. It shows whether all of the revenues
booked on the income statement have been collected.

At the same time, however, the cash flow does not necessarily show all the company's
expenses because not all expenses the company accrues are paid right away. Although
the company may have incurred liabilities, any payments toward these liabilities are not
recorded as a cash outflow until the transaction occurs.

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The first item to note on the cash flow statement is the bottom line item. This is likely to
be the "net increase/decrease in cash and cash equivalents (CCE)." The bottom line
reports the overall change in the company's cash and its equivalents (the assets that can
be immediately converted into cash) over the last period. If you check under current
assets on the balance sheet, you will find CCE. If you take the difference between the
current CCE and that of the previous year or the previous quarter, you should have the
same number as the number at the bottom of the statement of cash flows.

Analyzing Cash Flows

Using the cash flow statement in conjunction with other financial statements can help
analysts and investors arrive at various metrics and ratios used to make informed
decisions and recommendations.

Debt Service Coverage Ratio (DSCR)

Even profitable companies can fail if their
operating activities do not generate
enough cash to stay liquid. This can
happen if profits are tied up in
outstanding accounts receivable and
overstocked inventory, or if a company
spends too much on capital
expenditures (CapEx).

Investors and creditors, therefore, want to know if the company has enough CCE to settle
short-term liabilities. To see if a company can meet its current liabilities with the cash it
generates from operations, analysts look at the debt service coverage ratio (DSCR).

Debt Service Coverage Ratio = Net Operating Income / Short-Term Debt Obligations
(also referred to as "Debt Service")

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But liquidity only tells us so much. A company might have lots of cash because it is
mortgaging its future growth potential by selling off its long-term assets or taking on
unsustainable levels of debt.

Free Cash Flow (FCF)

To understand the true profitability of a business, analysts look at free cash flow (FCF).
FCF is a really useful measure of financial performance and tells a better story than net
income because it shows what money the company has left over to expand the business
or return to shareholders, after paying dividends, buying back stock, or paying off debt.

Free Cash Flow = Operating Cash Flow - Capital Expenditures

Unlevered Free Cash Flow (UFCF)

For a measure of the gross FCF generated by a firm, use unlevered free cash
flow (UFCF). This is a company's cash flow excluding interest payments, and it shows
how much cash is available to the firm before taking financial obligations into account.
The difference between levered and unlevered FCF shows if the business is
overextended or operating with a healthy amount of debt.

Example of Cash Flow

Below is a reproduction of Walmart Inc.'s cash flow statement for the fiscal year ending
on January 31, 2019. All amounts are in millions in Philippine Peso.

WMT Statement of Cash Flows (2019)

Cash flows from operating activities:
Consolidated net income 7,179
(Income) loss from discontinued operations, net of income taxes —
Income from continuing operations 7,179
Adjustments to reconcile consolidated net income to net cash provided by operating
activities:
Unrealized (Gains) and Losses 3,516
(Gains) and Losses for Disposal of Business Operations 4,850

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WMT Statement of Cash Flows (2019)

Depreciation and amortization 10,678
Deferred income taxes (499)
Other operating activities 1,734
Changes in certain assets and liabilities:
Receivables, net (368)
Inventories (1,311)
Accounts payable 1,831
Accrued liabilities 183
Accrued income taxes (40)
Net cash provided by operating activities 27,753

Cash flows from investing activities:

Payments for property and equipment (10,344)
Proceeds from the disposal of property and equipment 519
Proceeds from the disposal of certain operations 876
Payments for business acquisitions, net of cash acquired (14,656)
Other investing activities (431)
Net cash used in investing activities (24,036)

Cash flows from financing activities:

Net change in short-term borrowings (53)
Proceeds from issuance of long-term debt 15,872
Payments of long-term debt (3,784)
Dividends paid (6,102)
Purchase of Company stock (7,410)
Dividends paid to noncontrolling interest (431)
Other financing activities (629)
Net cash used in financing activities (2,537)

Effect of exchange rates on cash and cash equivalents (438)

Net increase (decrease) in cash and cash equivalents 742

Cash and cash equivalents at beginning of year 7,014
Cash and cash equivalents at end of year 7,756

Let's begin by seeing how the cash flow statement fits in with other components of
Walmart's financials. The final line in the cash flow statement, "cash and cash equivalents

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at end of year," is the same as "cash and cash equivalents," the first line
under current assets in the balance sheet.

The first number in the cash flow statement, "consolidated net income," is the same as
the bottom line, "income from continuing operations" on the income statement.

Because the cash flow statement only counts liquid assets in the form of CCE, it makes
adjustments to operating income in order to arrive at the net change in cash.

Depreciation and amortization expense appear on the income statement in order to give
a realistic picture of the decreasing value of assets over their useful life. Operating cash
flows, however, only consider transactions that impact cash, so these adjustments are
reversed.

Meanwhile, the net change in assets that are not in cash form, such as accounts
receivable and inventories, are also eliminated from operating income.

For example, in Walmart's cash flow statement, $368 million in net receivables are
deducted from operating income. From that, we can infer that there was a $368 million
increase in receivables over the prior year.

This increase would have shown up in operating income as additional revenue, but the
cash had not yet been received by year-end. Thus, the increase in receivables needed to
be reversed out to show the net cash impact of sales during the year. The same
elimination occurs for current liabilities in order to arrive at the cash flow from operating
activities figure.

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Investments in property, plant, and equipment and acquisitions of other

businesses are accounted for in the cash flow from investing activities section.
Meanwhile, proceeds from issuing long-term debt, debt repayments, and dividends paid
out are accounted for in the cash flow from financing activities section.

The main takeaway is that Walmart's cash flow was positive (an increase of Php742
million). That indicates that it has retained cash in the business and added to its reserves
in order to handle short-term liabilities and fluctuations in the future.

How are cash flows different than revenues?

Revenues refer to the income earned from selling goods and services. If an item is sold
on credit or via a subscription payment plan, money may not yet be received from those
sales and are booked as accounts receivable. These, however, do not represent actual
cash flows into the company at the time. Cash flows also track outflows as well as inflows
and categorize them with regard to the source or use.

What are the three categories of cash flows?

Operating cash flows are generated from the normal operations of a business, including
money taken in from sales and money spent on cost of goods sold (COGS) and other
operational expenses such as overhead and salaries. Cash flows from investments
include money spent on purchasing securities to be held as investments such as stocks
or bonds in other companies or in Treasuries.
Inflows are generated by interest and dividends paid on these holdings. Cash flows from
financing refers to the costs of raising capital—issuing shares or bonds, or taking out
loans.

What is free cash flow and why is it important?

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Free cash flow (FCF) is the cash left over after a company pays for its
operating expenses and CapEx. It is the money that remains after paying for items such
as payroll, rent, and taxes, and a company can use it as it pleases. Knowing how to
calculate FCF and analyze it will help a company with its cash management and will
provide investors with insight into a company's financials, helping them make better
investment decisions. FCF is an important measurement since it shows how efficient a
company is at generating cash.

Do companies need to report a cash flow statement?

The cash flow statement complements the balance sheet and income statement and is a
mandatory part of a public company's financial reporting requirements since 1987.

What is the price-to-cash flows (P/CF) ratio used for?

The price-to-cash flow (P/CF) ratio is a stock multiple that measures the value of a stock’s
price relative to its operating cash flow per share. The ratio uses operating cash flow,
which adds back non-cash expenses such as depreciation and amortization to net
income. P/CF is especially useful for valuing stocks that have positive cash flow but are
not profitable because of large non-cash charges.

How to Analyze a Company's Financial Position

What Is Financial Analysis?

To understand and value a company, investors examine its financial position by studying
its financial statements and calculating certain ratios. Fortunately, it is not as difficult as it
sounds to perform a financial analysis of a company.

The process is often a part of any program evaluation review technique (PERT), a project
management tool that provides a graphical representation of a project's timeline.

KEY TAKEAWAYS:

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• Investors value a company by examining its financial position based

on its financial statements and calculating certain ratios.
• A company's worth is based on its market value.
• To determine market value, a company's financial ratios are compared to its
competitors and industry benchmarks.

Understanding an Analysis of a Company's Financial Position

If you borrow money from a bank, you have to list the value of all of your significant assets,
as well as all of your significant liabilities. Your bank uses this information to assess the
strength of your financial position; it looks at the quality of the assets, such as your car
and your house, and places a conservative valuation upon them. The bank also ensures
that all liabilities, such as mortgage and credit card debt, are appropriately disclosed
and fully valued. The total value of all assets less the total value of all liabilities gives
your net worth or equity.

Evaluating the financial position of a listed company is similar, except investors need to
take another step and consider that financial position in relation to market value. Let's
take a look.

The Balance Sheet

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Like your financial position, a company's financial situation is defined by

its assets and liabilities. A company's
financial position also includes shareholder
equity. All of this information is presented to
shareholders in the balance sheet.1

Suppose that we are examining the financial

statements of the fictitious publicly listed
retailer The Outlet to evaluate its financial
position. To do this, we review the
company's annual report, which can often be
downloaded from a company's website.
The standard format for the balance sheet is assets, followed by liabilities, then
shareholder equity.

Current Assets and Liabilities

On the balance sheet, assets and liabilities
are broken into current and non-current
items. Current assets or current liabilities are
those with an expected life of fewer than 12
months.

For example, suppose that the inventories

that The Outlet reported as of Dec. 31, 2018,
are expected to be sold within the following
year, at which point the level of inventory will
fall, and the amount of cash will rise.

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Like most other retailers, The Outlet's inventory represents a significant

proportion of its current assets, and so should be carefully examined.

Since inventory requires a real investment of precious capital, companies will try to
minimize the value of a stock for a given level of sales, or maximize the level of sales for
a given level of inventory. So, if The Outlet sees a 20% fall in inventory value together
with a 23% jump in sales over the prior year, this is a sign they are managing their
inventory relatively well. This reduction makes a positive contribution to the
company's operating cash flows.

Current liabilities are the obligations the company has to pay within the coming year and
include existing (or accrued) obligations to suppliers, employees, the tax office, and
providers of short-term finance. Companies try to manage cash flow to ensure that funds
are available to meet these short-term liabilities as they come due.1

The Current Ratio

The current ratio—which is total current
assets divided by total current liabilities—is
commonly used by analysts to assess the
ability of a company to meet its short-term
obligations.

An acceptable current ratio varies across

industries, but should not be so low that it
suggests impending insolvency, or so high
that it indicates an unnecessary build-up in cash, receivables, or inventory. Like any form
of ratio analysis, the evaluation of a company's current ratio should take place in relation
to the past.

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Non-Current Assets and Liabilities

Non-current assets or liabilities are those with lives expected to extend beyond the next
year. For a company like The Outlet, its biggest non-current asset is likely to be
the property, plant, and equipment the company needs to run its business.

Long-term liabilities might be related to obligations under property, plant, and equipment
leasing contracts, along with other borrowings.

Financial Position: Book Value

If we subtract total liabilities from assets, we are left with shareholder equity. Essentially,
this is the book value, or accounting value, of the shareholders' stake in the company. It
is principally made up of the capital contributed by shareholders over time and profits
earned and retained by the company, including that portion of any profit not paid to
shareholders as a dividend.

Market-to-Book Multiple
By comparing the company's market value to
its book value, investors can, in part, determine
whether a stock is under- or over-priced. The
market-to-book multiple, while it does have
shortcomings, remains a crucial tool for value
investors. Extensive academic evidence
shows that companies with low market-to-book
stocks perform better than those with high
multiples. This makes sense since a low
market-to-book multiple shows that the
company has a strong financial position in relation to its price tag.

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Determining what can be defined as a high or low market-to-book ratio

also depends on comparisons. To get a sense of whether The Outlet's book-to-market
multiple is high or low, it should be compared to the multiples of other publicly listed
retailers.

In summary, a company's financial position tells investors about its general well-being. A
financial analysis of a company's financial statements—along with the footnotes in the
annual report—is essential for any serious investor seeking to understand and value a
company properly
In- Class Assignment
1. Deliberate among your members about your Financial study.
2. Submit it in the google drive that will be provided to you.
3. (1.5, 12 pt. Arial)

Generalization:
A feasibility study is essentially written prior to a project’s undertaking for a simple reason:
Directors of companies and their investors want to ensure that any given project they plan
on developing is actually “feasible”, and preparing a study showing this feasibility is the
main point of writing such a report (which of course will help save needed capital and time

in the long run). A feasibility study includes such vital information and data as the funding
needs to complete the project, the market opportunity, government regulations, risk
factors, strength and weaknesses, the management team and the financials of the
company. While a feasibility study somewhat sounds like a business plan, such reports
tend to be many times longer with more details on the market and financials.

Supplemental Online References

BUSINESS CORPORATE FINANCE & ACCOUNTING

Cash Flow
By ADAM HAYES Reviewed by AMY DRURY Updated May 31, 2021
https://www.investopedia.com/terms/c/capitalexpenditure.asp

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Week 15-16

Chapter 4

SOCIO-ECONOMIC

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Objectives:

1. Identify the objectives of the economic and

social feasibility study, and how to estimate the
contribution of the project to the GDP, as well
as to identify the criteria for evaluating
economic and social feasibility.

2. To acquaint students with the analysis of the

national impact of the project on the economy,
and the society

Pre-Assessment:

Rate your comfort / knowledge with the topic on a scale 1 to 5. Number 5 being the most
comfortable or knowledgeable about the topic to be discussed.

Introduction:

This chapter discusses the benefits of the proposed business and how the business
affects the economy, employment, environment, household, and government. It
stated also the contribution of the business to the economy and the relevance of it
to the society.

This should be considered by the business in order to attain a positive feedback to the
community. The business should not only be concern about its profit but also on the
effect of it to the people and the condition of the society.

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Lesson Presentation:

Socio-economic aspect aims to discuss and determine what are the social implications of
the study to the. society, the economic implications and the environment implications of
the study to the economy.

Effects of the Business to the Society

Society refers to the group of people living together in an organized community

with shared by laws, traditions and values. The proposed business will play a part to the
society because it will affect the government and also the household. The business will
give contributions to them that are beneficial on their part

Effects in the Government

Government is a political system which is in charge of administering and

regulating a specific community or the country itself. By that, they are concern in all
circumstances that affects the country.

Effects in the Household

Families and businesses have often been treated as naturally separate institutions,
but in reality they are inextricably intertwined. Such picture manifest that the institution of
the family has implications for the emergence of new business opportunities,
opportunity recognition, business start-up decisions, and the resource mobilization
process. Thus, this business is supposed to be an eye-opener to the families
to create business or support such business through sending labor force or even
entrepreneurs.

Effects of the Business to the Economy

Economy, as defined by Webster Dictionary, is the process or system by which goods

and services are produced, sold, and bought in a country or region. Economics also

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comprises the employment and states’ market value which will be

affected if this proposed business will be established.

Effects in Employment

Job opportunities to the locality which reduces the unemployment rate of the
economy. This implies an increase of job opportunities to the society.

What does a Socio-Economic Study Comprise?

• Introduction
• Objectives of the Study
• Contribution to Phil. Economy
• Employment Generation
• Social desirability
• Environment
• Consumer

In-Class Assignment:

1. Confer and make this study among your group mates.

2. There will be a presentation next meeting

3. Space – 1,5, Fonts size – 12, Font style – Arial

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Generalization:

Businesses are the driving forces in the company of the country. They generate income
from which the government derives taxes for the processes that stimulate the economic
growths that keeps the country going and surviving. When undertaking a business one
should not only focus on the profit but focus on the social economic benefits as well. It is
notable if a business is established also with the welfare of the people in the community
in mind rather in the increase of the wealth of the businessmen or the investors alone.

Online Supplemental References

https://study.com/academy/answer/what-is-the-meaning-of-socio-economic-
feasibility.html

https://prezi.com/paz337l-to2i/socio-economic-feasibility/

https://www.answers.com/Q/What_is_the_meaning_of_Socio_Economic_aspect_i
n_the_Feasibility_Study

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A. Introduction
Emerging Developing Well done Excellent
1 2 3 4 5 6
Little or no introduction • Interesting or engaging introduction
Comments: Comments:

B. Organization
Emerging Developing Well done Excellent
1 2 3 4 5 6
Disorganized or poorly organized •Well organized and easy to follow
• smooth transitions
Comments: Comments:

C. Delivery
Emerging Developing Well done Excellent
1 2 3 4 5 6
• Manuscript was read or seemed memorized • Speech was clear, smooth and articulate
• Speech was too slow/fast/soft • Voice projection and spacing effective
• Eye contact lacking or absent • Eye contact appropriate, help connect to panelists
• Delivery unsure, uncomfortable, stiff, unprepared • Delivery comfortable, poised and prepared

Comments: Comments:

D. Content
Emerging Developing Well done Excellent
1 2 3 4 5 6
• Paper and presentation highly technical for • General audience can understand the paper
audience presentation
• Terms undefined or minimally defined; • Key terms defined and necessary information
background information lacking; or assumptions provided
lacking • Assumptions surfaced

• Presentation deficient in evaluation and synthesis •Presentation information evaluated and well
synthesized
Comments: Comments:

E. Response to Questions
Emerging Developing Well done Excellent
1 2 3 4 5 6

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Misunderstands questions; sometimes cannot answer Answers questions well with reference to own work;
questions shows knowledge of subject

Comments: Comments:

Oral Presentation Rubrics

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Score Total
Aspect Detail 90- 86 85-81 80-76 75-70
I. Organization and A. The Vision and Mission and the
Management Logo is befitting for the business.
Assessment B. The Type of Organization was
well presented and explained.
C. The Organization structure was
well thought and organized.
D. The Salaries, benefits and
recruitment process was
planned.
E. The GANTT chart was prepared
and timely.
F. Established a sound
conclusion as to its Organization
and Management Feasibility.
II. Technical A. Specific technical
Assessment requirements were identified and
expounded (focus on process,
technology used, equipment,
machineries and the likes).
B. Basis for technical
specifications were presented
and explained.
C. Clearly presented the technical
costs.
D. Established a sound conclusion
as to its technical Feasibility.
III. Marketing A. Identified the Market and its
Assessment segmentation.
B. Explained the demand and
supply and its evaluation.
C. The SWOT analysis was clearly
explained
D. The Plan of Distribution was
discussed well.
E. The proposed marketing,
positioning and sales strategies
were explained well.
F. Clearly presented the other
Market feasibility.

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G. Established a sound
conclusion as to its Marketing
Feasibility
IV. Financial A. Required Financial statements
Assessment are made ( focus on projected
income statement, Business of
statement condition, Cash flow,
ROI )
B. There is a complete data on
which to base a thorough
analysis. (note: with acceptable
assumptions and must be
consistent with the cost stated in
the organization, technical and
market study.)
C. Analysis of financial
performance is with valid and
relevant supportive detail,
accurate and correct calculations
and appropriate interpretation.
D. Established a sound
conclusion as to its Financial
Viability.
V. Socio-Economic Clearly established a sound socio-
Assessment economic contributions.
Over All Total

Legend:

Advance: 90-86
Proficient: 85-81
Sufficient: 80-76
Lacking: 75-70

Name of Business: _______________________ Section/ Group: ___________

Date of Presentation: _____________________ Group Leader: ____________

Professor: ______________________________ Date: _____________

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Format:
• Font style – Arial
• Font size -12
• Space – 1.5
• A4 Bond Paper
• Soft Bound (Light Blue with Black print)
• Margin 1 inch per side/ top 1.5 inches /bottom 1 inch
• With Official Letterhead

I. Management/ Organizational Feasibility Study Components:

• Introduction
• Objectives of the study
• Description of the business structure/ Type of Organization
• Company Vision and Mission
• Company Logo
• Company Goals and objectives
• Key Business Operation
• Description of your organizational structure
• Internal and external principles and practices of the business
• Professional skills and resumes/ Job descriptions
• Salaries and Benefits
• Recruitment Process
• Performance Appraisal
• Operating Hours and work Schedules
• GANTT Chart
II. Technical Feasibility Study Components:
• Introduction
• Objectives of the study
• Technical Production Description

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• Product Prototype
• Production Process
• Production Schedule
• Machinery and Equipment
• Plant Location and Lay out
• Building/Office/Plant
• Raw materials Requirement
• Packaging
• Production Supplies and Inventory
• Office Supplies
• Furniture and Fixtures
• Utilities needed
• Quality and Safety Measures
• Waste Disposal System

III. Marketing Feasibility Study Components

• Introduction
• Objectives of the Study
• Market Description/ Target Market Profile
• SWOT Analysis
• Plan of Distribution
• Market Segmentation
• Demand Analysis (Historical Demand Data and Projected Demand Data)
• Supply Analysis (Historical Supply Data and Projected Supply Data)
• Demand and supply Gap and Analysis
• Competitive Edge
• Current Market Condition
• List of Competitors and their Products and Prices
• Proposed Marketing Strategies

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• Positioning strategy
• Pricing
• Unique Selling
• Sales Strategy
• Future Plans and strategic Opportunities
• Questionnaire survey

IV. Financial Feasibility Study Components

• Introduction
• Objectives of the study
• Capital Expenditures
• Financial Statements
a. Projected Statement of financial position
b. Projected statement of Cash Flows
• Projected Balance Sheets
• Projected Cash Flow
• Projected Income statement
• Statement of Financial Position

V. Socio- Economic Feasibility Study

• Introduction
• Objectives of the Study
• Contribution to Phil. Economy
• Employment Generation
• Social desirability
• Environment
• Consumer

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VI. Other Documents That Are Needed in a Feasibility Study Report

• Approval Sheet
• Acknowledgement
• Executive Summary (to be done after the proponents are done with the 5
studies.)
• Table of Contents
• Appendices
a. Survey Questionnaire
b. Daily Time Record
c. Sample Company ID
d. Sample BIR Application Form
e. Sample BIR FORM No. 2303 Certificate of registration
f. Sample Certificate of registration (Business permit and license)
g. Sample BIR permit for issuance of receipt
h. Sample DTI Business name search
i. Sample Certificate of Business Name registration
j. Sample Sanitary Permit to operate
k. Sample Fire Safety Evaluation Clearance
l. Sample Fire Safety Inspection Clearance
m. Curriculum Vitae of the Team
n. Power point slides of every study

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