Financial literacy: income and decisions (lesson 1)  (Page 8/9)

Skill 2: Buying - All small business owners are involved in buying, also called purchasing. One category of buying is investing in assets. Let’s say you have an office and you buy a copy machine. You’ll probably keep it for several years. It becomes part of what your business owns – it’s an asset. Assets increase what your business is worth if someone were to buy it from you. If you’re a manufacturer, a second category of spending would be buying the materials you use to make your products. This expense is called your cost of goods sold. For some expenses, you spend the same amount every month – like rent, or equipment leases. These are called your fixed costs. You’ll have other expenses that change from month to month. These are called variable costs. For example, if you have an ice cream store, you’ll probably spend a lot more on electricity in August than you will in February. Other expenses, like taxes, may only occur a few months out of the year, and the amount changes each time. This is another example of a variable cost. The combination of your fixed and variable costs is known as your overhead – that is, the amount of money you have to spend every month just to be open for business. To make money in business, keep your overhead as low as you can.

Skill 3: Producing means providing products and services for others to buy. Manufacturers call this the production process. Service businesses might call it the service delivery process. For higher profits, make it more quickly, less expensively, better quality and more convenient.

Skill 4: Selling - Many people in business use the word marketing to describe everything that leads to making a sale. Marketing is all the things your business does to gain new customers – and to interest your customers in continuing to buy from you over time. There are many aspects to sales and marketing, but the important thing to remember is that it all starts with the customer. The simple truth is this: No customers, no business.

Skill 5: Tracking refers to the skill of keeping good business records. Tracking the money in your business is called accounting, “keeping the books,” or bookkeeping. Track all of your monthly bills and expenses. These are called your payables. Track the money your customers owe you. These are called your receivables. No matter what kind of business you have, money will be constantly flowing in and out. This is known as cash flow.

Skill 6: Managing means having an overall vision of what you want your business to become, and guiding it toward those goals. If you have people working for you, managing also means being the leader of the team.

Step 14.- Hand out the Informative Sheet .

Step 15.- Hand out the Assessment Worksheet 2 . Use these or similar activities to give participants an opportunity to apply what they have just learned to real-life scenarios. Mention to students to register its answer in a sheet. You decide the time period to answer the assessment activity. Have students make a brief presentation to the class on the companies they researched.