DE LA SALLE UNIVERSITY-DASMARIÑAS

COLLEGE OF ENGINEERING, ARCHITECTURE, AND

TECHNOLOGY
ENGINEERING DEPARTMENT
INDUSTRIAL ENGINEERING PROGRAM

TECHNOPRENEURSHIP
- MODULE 5
BY:
EDILBERTO FLORES MOLAS

TABLE OF CONTENTS

MODULE 5 : TOPICS
- ACCOUNTING BASICS
- FINANCIAL ANALYSIS
 - RAISING CAPITAL
- ETHICS AND SOCIAL RESPONSIBILITIES
- GLOBALIZATION
1.1.1. GOSPEL READING

1.1.2. TOPIC LEARNING OUTCOMES

1.1.3. RECALL OF PREVIOUS TOPIC

1.1.4. ACCOUNTING BASICS

1.1.5. FINANCIAL ANALYSIS

1.1.6. RAISING CAPITAL

1.1.7. ETHICS AND SOCIAL RESPONSIBILITIES

1.1.8. GLOBALIZATION

1.1.9. GENERALIZATION

1.1.10. APPLICATION

1.1.11. ASSESSMENT/EXERCISES

1.1.12. REFERENCES

I. GOSPEL READING

Let us put ourselves in the presence of God…

In the name of the Father, the Son, and the Holy Spirit…

Proverbs 2:6 and 10, “For the Lord gives wisdom, and from

His mouth come knowledge and understanding. For wisdom

will enter your heart, and knowledge will be pleasant to your

soul”
 St. John Baptist de la Salle. .pray for us.. Live Jesus in our

hearts.. Forever.

“VIVAT JESUS”

II. TOPIC LEARNING OUTCOMES

At the end of the semester, students can:

CLO1. formulate the concepts of Technopreneurship, business

ownership, creativity
and innovative mind in business.
CLO2. experience the dynamics of participating on a business team,
create and
present a business plan for a technology idea.
CLO3. develop a business plan into successful action plans based on
current
technologies and creative a new venture to support the
business.
CLO4. demonstrate an understanding of professional codes of
conduct and ethical
Standards as they apply to entrepreneurship and innovation in
business practice.
CLO5. apply skills related to business communication, interpersonal,
and team skills suited
to the application of entrepreneurship and innovation
concepts and theories to real-
world practice
CLO6. understand and experience the entrepreneurial process from
the generation of
creative ideas,

III - RECALL OF PREVIOUS TOPICS:

MARKET IDENTIFICATION AND ANALYSIS

- Target market
- Creating Competitive Advantage
 - Business Model
- Intellectual Property

IV – Basics of Accounting :
I- Basic accounting terminology
1. Accounting - is the process of recording, summarizing,
analyzing, and reporting financial transactions of a business to
oversight agencies, regulators and investors.
2. Bookkeeping- is the recording of financial transactions,
and is part of the process of accounting in business.
Transactions include purchases, sales, receipts, payments, and
other transactions in General journal entry :

JOURNALIZING:
Journal - is a historical record of business
transactions or events , “jour “ meaning day
Journal entry- means recording the business
transactions in a journal. For each transactions a
separate entry is recorded. Before recording the
transaction is analyzed to determine which
account is to be debited and which account is to
be credited. The proforma journal is shown
below:

JOURNAL
DATE PARTICULARS L.F. DEDIT CREDIT
(1) (2) (3) (4) (5)

Column 1 (Date): The date of the transaction

on which it takes pale is written in this column.

Column 2 (Particulars): In this column, the

name of the accounts to the debited is written first,
then the names of the accounts to be
credited and lastly, the narration (i.e. a brief explanation
of transaction) are entered.

Column 3 (L.F.): L.F. stands for ledger folio which

means page of the ledger. In this column are entered the page
numbers on which the various accounts appear in the ledger.

Column 4 (Dr. Amount): In this column, the amount to

be debited against the ‘Dr.’ Account is written along with the
nature of currency.

Column 5 (Cr. Amount): In this column the amount to

be credited against the ‘Cr.’ Account is written along with the
nature of currency.

Advantages of Using Journal

Journal is used because of the following

advantages:
 A journal contains a permanent record of all
the business transactions.
 The journal provides a complete chronologi-
cal (in order of the time of occurrence) his-
tory of all business transactions and the task
of later tracing of some transactions is facili-
tated.
 A complete information relating to one single
business transaction is available in one place
with all its aspects.
 The transaction is provided with an explana-
 tion technically called a narration.
 Use of the journal reduces the possibility of
an error when transactions are first recorded
in this book.
 The journal establishes the quality of debits
and credits for a transaction and reconciles
any problems. If a business purchases a bicy-
cle, it is necessary to decide whether the bicy-
cle represents ordinary goods or machinery.
Further any amount paid is debited to bicycle
account and credited to cash account.
  The use of journals avoids omission or dupli-
cation of transactions or parts of transaction.
Without the journal the accountant would be
forced to got to the individual account to
enter debits and credits. Therefore it is possi-
ble for accountant to miss part of a transac-
tion, duplicate all or part of a transaction or
incorrectly record debits and credits. Even
with the Journal, it is still possible to omit
transactions and make other errors. However,
the Journal reduces these problems.
 Once a transaction is recorded in the journal,
it is not necessary to post it immediately in
the ledger accounts. In this, way, the journal
allows the delayed posting.

In connection with the journal, the following

points are to be remembered:
 For each transaction, the exact accounts
should be debited and credited. For that, the
two accounts involved must be identified to
pass a proper journal entry.
 Sometimes, a journal entry may have more
than one debit or more than one credit. This
type of journal entry is called compound jour-
nal entry. Regardless of how many debits or
 credits are contained in a compound journal
entry, all the debits are entered before any
credits are entered. The aggregate amount of
debits should be equal to the aggregate
amount of credits.
 For a business, journal entries generally ex-
tend to several pages. Therefore, the total are
cast at the end of each page, against the debit
and credit columns, the following words
and written in the particular column, which
indicates, carried forward (of the amount on
the next page) “Total c/f”.
 page in the amount columns; and opposite to that
on the left, the following words are written in the
particulars column to indicate The debits and credits
totals of the page are then written on the next
brought forward (of the amount of the previous
page) “Total b/f”. This process is repeated on every
page and on the last page, “Grand Total” is cast.

3.3.1 Classification of Accounts

1. Personal Accounts

Accounts which are related with accounts of

individuals, firms, companies are known as personal
accounts. The personal accounts may further be
classified into three categories:
(i) Natural Personal Accounts: Accounts of indi-
viduals relating to natural persons such as
 Akhil’s A/c, Rajesh’s A/c, Sohan’s A/c are
natural personal accounts.
(ii) Artificial Personal Accounts: Accounts of
companies, institutions such as Reliance In-
dustries Ltd; Lions Club, M/s Sham & Sons,
National College account are artificial per-
sonal accounts. These exist only in the eyes
of law.
 (iii) Representative Personal Accounts: The ac-
counts which represent some person such as
wage outstanding account, prepaid insurance
account, accrued interest account are consid-
ered as representative personal accounts.

2. Real Accounts

Real accounts are the accounts related to

assets/properties. These may be classified into
tangible real account and intangible real account.
The accounts relating to tangible assets such as
building, plant, machinery, cash, furniture etc. are
classified as tangible real accounts. Intangible real
accounts are the accounts related to intangible assets
such as goodwill, trademarks, copyrights,
franchisees, Patents etc.

3. Nominal Accounts

The accounts relating to income, expenses, losses

and gains are classified as nominal accounts. For
example Wages Account, Rent Account, Interest
Account, Salary Account, Bad Debts Accounts.
 RULES FOR DEBIT AND
CREDIT
Type of Accounts Rules for Debit Rules for Credit
(a) Personal Debit the receiver Credit the giver
Account

(b) Real Account Debit what comes in Credit what goes out
(c) Nominal Debit all expenses and Credit all incomes and
Account Losses gains

Illustration: How will you classify the following into personal,

real and nominal accounts?
Investment

Investments
(i) Freehold Premises
(ii) Accrued Interest
 (iii) Punjab Agro Industries Corporation
(iv) Janata Allied Mechanical Works
(v) Salary Accounts
(vi) Loose Tools Accounts
(vii) Purchases Account
(viii) Indian Bank Ltd.
(ix) Capital Account
(x) Brokerage Account
(xi) Toll Tax Account
(xii) Dividend Received Account
(xiii) Royalty Account
(xiv) Sales Account

Solution
Real Account: (i), (ii), (vii), (viii), (xv).
Nominal Account: (vi), (ix), (xi), (xii), (xiii), (xiv)
Personal Account: (iii), (iv), (v), (x)

Journalizing

Journalism is the process of recording journal

entries in the Journal. It is a systematic act of entering
the transaction in a day book in order of their
occurrence i.e., date-wise or event-wise. After
analyzing the business transactions, the following
steps in journalizing are followed:
(i) Find out what accounts are involved in busi-
ness transaction.
(i) Ascertain what is the nature of accounts in-
 volved?
(ii) Ascertain the golden rule of debit and credit
is applicable for each of the accounts in-
volved.
(iii) Find out what account is to be debited
which is to be credited.
(iv) Record the date of transaction in the “Date Col-
umn”.
(v) Write the name of the account to be debited
very near to the left hand side in the ‘Partic-
ulars Column’ along with the word ‘Dr’ on
the same line against the name of the ac-
count in the ‘Particulars Column’ and the
amount to be debited in the ‘Debit
Amount column’ against the name of the ac-
count.
(vi) Record the name of the account to be cred-
ited in the next line preceded by the word
‘To’ at a few space towards right in the ‘Partic-
ulars Column’ and the amount to be
credited in the ‘Credit Amount Column’
in front of the name of the account.
(vii) Record narration (i.e. a brief explanation of
the transaction) within brackets in the follow-
ing line in ‘Particulars Column’.
(viii) A thin line is drawn all through the particu-
lars column to separate one Journal entry
from the other and it shows that the entry of
a transaction has been completed.

Illustration: Analyze the following transactions.

(a) Ramesh started his business with cash
(a) Borrowed from Nikhil
(b) Purchased furniture
(c) Purchased furniture from Mohan on credit
(d) Purchased goods for cash
(e) Purchased goods from Ram on credit
(f) Sold goods for cash
(g) Sold goods to Hari on credit
(h) Received cash from Hari
(i) Paid cash to Ram
(j) Deposited into bank
(k) Withdrew cash for personal use
(l) Withdrew from bank for office use
(m) Withdrew from bank for personal use
(n) Received cash from a customer, Shyam
 (o) Paid salary by cheque
(p) Received donation in cash
(q) Paid to Ram by cheque
(r) Paid salary
(s) Paid rent by cheque
(t) Goods withdrawn for personal use
(u) Paid an advance to suppliers of goods
(v) Received an advance from customers
(w) Paid interest on loan
(x) Paid instalment of loan
(y) Interest allowed by bank.

Solution
ANALYSIS OF TRANSACTIONS
Accounts involved Nature of How affected Whether to
accounts be debited
Transaction

or credited

(a) Cash A/c Real Cash is coming in Debit

Capital A/c Personal Ramesh is the giver Credit
(b) Cash A/c Real Cash in coming in Debit
Loan from Nikhil A/c Personal Nikhil is the giver Credit
(c) Furniture A/c Real Furniture is coming in Debit
Cash A/c Real Cash is going out Credit
(d) Furniture A/c Real Furniture is coming in Debit
Mohan’s A/c Personal Mohan is the giver Credit
(e) Purchases A/c Real Goods are coming in Debit
Cash A/c Real Cash is going out Credit
(f) Purchases A/c Real Goods are coming in Debit
Ram’s A/c Personal Ram is the giver Credit
(g) Cash A/c Real Cash is coming in Debit
Sales A/c Real Goods are going out Credit
(h) Hari’s A/c Personal Hari is the receiver Debit
Sales A/c Real Goods are going out Credit
(i) Cash A/c Real Cash is coming in Debit
Hari’s A/c Personal Hari is the giver Credit
(j) Ram’s A/c Personal Ram is the receiver Debit
Cash A/c Real Cash is going out Credit
(k) Bank A/c Personal Bank is the receiver Debit
Cash A/c Real Cash is going out Credit
(l) Drawings A/c Personal Ramesh is the receiver Debit
Cash A/c Real Cash is going out Credit
 Accounts involved Nature of How affected Whether to
accounts be debited
Transaction

or credited

(m) Cash A/c Real Cash is coming in Debit

Bank A/c Personal Bank is the giver Credit
(n) Drawings A/c Personal Ramesh is the receiver Debit
Bank A/c Personal Bank is the giver Credit
(o) Cash A/c Real Cash is coming in Debit
Shyam’s A/c Personal Shyam is the giver Credit
(p) Salary A/c Nominal Salary is an expense Debit
Bank A/c Personal Bank is the receiver Credit
(q) Cash A/c Real Cash is coming in Debit
Donation A/c Nominal Donation is a gain Credit
(r) Ram’s A/c Personal Ram is the receiver Debit
Bank A/c Personal Bank is the giver Credit
(s) Salary A/c Nominal Salary is an expense Debit
Cash A/c Real Cash is going out Credit
(t) Rent A/c Nominal Rent is an expense Debit
Bank A/c Personal Bank is the giver Credit
(u) Drawing’s A/c Personal Ramesh is the receiver Debit
Purchases A/c Real Goods are going out Credit
(v) Advance to Suppliers A/c Personal Suppliers are the receivers Debit
Cash A/c Real Cash is going out Credit
(w) Cash A/c Real Cash is coming in Debit
Adv. from Customers A/c Personal Customers are the givers Credit
(x) Interest on Loan A/c Nominal Interest on loan is an Debit
expense
Cash A/c Real Cash is going out Credit
(y) Loan A/c Personal Lender is the receiver Debit
Cash A/c Real Cash is going out Credit
(z) Bank A/c Personal Bank is the receiver Debit
Bank Interest A/c Nominal Bank Interest is a gain Credit

3. Income Statement – shows the annual sales /revenue

and expenses and taxable income or loss and gross
income subject to tax and net profit after tax.
Example of: Income Statement XYZ Enterprises
for the year ended 2020.
1. Gross revenue/sales Php.1,500,000.00
Less: cost of goods sold 500,000.00
2. Gross Income from sales 1,000,000.00
Less Operating Expenses:
2.1 Salaries & wages Php. 200,000
2.2 Interest from loan 100,000
2.3 Amortization 100,000
2.4 Depreciation 150,000
2.5 Rent 50,000
2.6 Admin. Expense 150,000
2.7 Energy, fuel,& water 50,000
2.8 Maintenance exp. 30,000
2.9 Insurance 20,000
2.10 Others 20,000 (870,000.0)
3.0 Taxable Income +/(-) ------ Php.130,000.0
Less: 30% tax -------- 39,000.0

4.0 Net Income Php. 91,000.00

3. Balance Sheet (XYZ Enterprises) – Shows the assets

and liabilities of an enterprise, or the value / worth of the
enterprise

1. Assets:
Current Assets
Cash on bank Php. 1,000,000.0
Accounts receivable 200,000.0
Inventories 300,000.0
 Total Php. 1,500,000.00

Fixed Assets:
Land 1,500,000.00
Buildings 4,000,000.00
Machineries & Equipt. 2,500,000.00
Total 8,000,000.00

Total Assets Php.9,500,000.00

2.0 Liabilities & Owners Equity

Accounts Payable 150,000.00
Bank Notes 250,000.00
Mr. XYZ Equity 9,100,000.00
Total Liabilities Php. 9,500,000.00

4. Cash Flow – Shows the operating revenue on a given

particular time and cash ending balance on the same
period after allocation of required cash for operations

Operating Revenue Php. 1,500,000.00

Less : Labor 200,000.0
RM/CGS 500,000.0
Amort. Exp. 100,000.0
Rent 50,000.0
Adm. Exp. 150,000.0
Energy/etc. 50,000.0
 Maint. 30,000.0
Insurance 20,000.0
Others 20,000.0 1,120,000.00
Cash Flow Ending Balance Php. 380,000.00

II – Financial Analysis:
Financial analysis is used to evaluate economic trends, set financial
policy, build long-term plans for business activity, and identify projects or
companies for investment. This is done through the synthesis of financial
numbers and data. A financial analyst will thoroughly examine a
company's financial statements—the income statement, balance sheet, and
cash flow statement. Financial analysis can be conducted in both corporate
finance and investment finance settings.

Financial Ratios:
5 Basic Financial Ratios And What They Reveal
1. Working Capital Ratio 
Working capital represents a company's ability to pay its current liabilities with its current assets.
Working capital is an important measure of financial health since creditors can measure a com-
pany's ability to pay off its debts within a year.

Working capital represents the difference between a firm’s current assets and current liabilities.
The challenge can be determining the proper category for the vast array of assets and liabilities on a
corporate balance sheet and deciphering the overall health of a firm in meeting its short-term com-
mitments.

Assessing the health of a company in which you want to invest involves understanding its liquidity
—how easily that company can turn assets into cash to pay short-term obligations. The working
capital ratio is calculated by dividing current assets by current liabilities.

So, if XYZ Corp. has current assets of $8 million, and current liabilities of $4 million, that's a 2:1
ratio—pretty sound. But if two similar companies each had 2:1 ratios, but one had more cash
among its current assets, that firm would be better able to pay off its debts quicker than the other.
2. Quick Ratio
Also called the acid test, this ratio subtracts inventories from current assets, before dividing that
figure into liabilities. The idea is to show how well current liabilities are covered by cash and by
items with a ready cash value. Inventory, on the other hand, takes time to sell and convert into liq-
uid assets.

If XYZ has $8 million in current assets minus $2 million in inventories over $4 million in current
liabilities, that's a 1.5:1 ratio. Companies like to have at least a 1:1 ratio here, but firms with less
than that may be okay because it means they turn their inventories over quickly.

3. Earnings per Share (EPS)

When buying a stock, you participate in the future earnings (or risk of loss) of the company. Earn-
ings per share (EPS) measures net income earned on each share of a company's common stock. The
company's analysts divide its net income by the weighted average number of common shares out-
standing during the year.

If a company has zero or negative earnings (i.e. a loss) then earnings per share will also be zero or
negative.

4. Price-Earnings (P/E) Ratio

Called P/E for short, this ratio reflects investors' assessments of those future earnings. You deter-
mine the share price of the company's stock and divide it by EPS to obtain the P/E ratio.

If, for example, a company closed trading at $46.51 a share and EPS for the past 12 months aver-
aged $4.90, then the P/E ratio would be 9.49. Investors would have to spend $9.49 for every gener-
ated dollar of annual earnings.

Note that if a company has zero or negative earnings, the P/E ratio will no longer make sense, and
will often appear as N/A for not applicable.

When ratios are properly understood and applied, using any one of them can help improve your in-
vesting performance.

Even so, investors have been willing to pay more than 20 times the EPS for certain stocks if hunch
that future growth in earnings will give them an adequate return on their investment.

5. Debt-Equity Ratio 
What if your prospective investment target is borrowing too much? This can reduce the safety mar-
gins behind what it owes, jack up its fixed charges, reduce earnings available for dividends for
folks like you and even cause a financial crisis.

The debt-to-equity (D/E) is calculated by adding outstanding long and short-term debt, and divid-
ing it by the book value of shareholders' equity. Let's say XYZ has about $3.1 million worth of
loans and had shareholders' equity of $13.3 million. That works out to a modest ratio of 0.23,
which is acceptable under most circumstances. However, like all other ratios, the metric has to be
analyzed in terms of industry norms and company-specific requirements.

6. Return on Equity (ROE)

Common shareholders want to know how profitable their capital is in the businesses they invest it
in. Return on equity is calculated by taking the firm's net earnings (after taxes), subtracting pre-
ferred dividends, and dividing the result by common equity dollars in the company.

Financial ratio formulas:

1. Liquidity:
Current ratio = Current Assets/Current Liabilities

Quick Ratio = Current Assets – Inventory/Current Liabilities

Net Working Capital to Sales Ratio = (Current Assets – Current Liabilities)/Sales

2. Profitability

Gross Margin = Gross Profit / Sales Income

Operating Profit Margin = Operating Income/Sales

Net Profit Margin = Net Income/Sales

3. Return Ratio

Return on Assets
= Net Income / Total Assets

Return on Equity
= Net Income /Shareholder’s Equity
FINANCIAL RATIO’S OF XYZ ENTERPRISES

1. LIQUIDITY ;

Current ratio = Current Assets/Current Liabilities

= Php1,500,000.00/Php400,000.00
= 3.75

Quick Ratio = Current Assets – Inventory/Current Liabilities

= Php1,500,000 – Php300,000/Php400,000.00
= 3.0

Net Working Capital to Sales Ratio = (Current Assets – Current Liabilities)/Sales

= Php1,500,000.00 – Php400,000/Php1,500,000.0
= 0.73

2. Profitability
Gross Margin = Gross Profit / Sales Income
= Php1,000,000/Php1,500,000
= 0.67

Operating Profit Margin = Operating Income/Sales

= Php130,000/Php1500,000.00
= 0.087
Net Profit Margin = Net Income/Sales
= Php91,000/Php1,500,000.00
= 0.061

3.0 Return Ratio:

Return on Asset =Net Income/total asset

=Php91,000/Php9,500,000
= 0.00958
Return on Equity = Net Income/Total Equity
=Php91,000/Php9,100000.00
= 0.01
4.0 Payback
Payback Period = Total Investment/Net Profit
= Php9,500,000/Php91000
=104.4
iii - RAISING CAPITAL
Kinds of Capital
Capital – is a single term used to cover the land, buildings, Machineries ,
tools, and materials of a productive enterprise.

1. Fixed Capital – are money needed to finance or buy Land, buildings,

machineries, tools and other installation to be used over and over
again for a long period of time. If acquired they now become fixed as-
sets of the company.
2. Working Capital – are money or funds needed to cover its operation-
to maintain plant, to purchase materials and supplies, to pay salaries
and wages, to cover storage,, transportation, and shipping services, for
advertising, and to tide over the enterprise during the time lag between
the sale of its products and payment for them. This are current opera-
tions and the funds to cover them is called working capital.

Sources of capital funds:

1. The money market
a. Banking houses for short and long term loans
b. Industrial financing corporations
c. Government owned and controlled corp. like DBP,
DOST, Land Bank, ect.
d. Trade Credits - acquisition of machineries, tools,Supplies, and
raw materials on credit terms
e. Credit instruments

The Budget
It is a long term responsibility of management to use investment that
will yield the largest possible profit or return, and it is the function of
budgeting to plan that profit picture.
Types of budgets:
 1. The static budget – This type of budget serve a valuable purpose in
the planning and control of certain fixed types of expenditures, and
suited for government type of operation. This is used solely in
manufacturing budgeting for projects like automation program, ex-
pansion program, etc.

2. The Variable Budget – The variable budget is constructed in an-

ticipation of variations in sales. It provides in advance for orderly
change in the volume of production and expenditures.

Preparing the budget

The annual budget is normally done in the latest part of the year
October to December in preparation for the budgetary requirement for next
year operations. The Finance department is the coordinating unit and given
the task of consolidating the entire budget by cost centers. Projected financial
statements are then prepared to determine possible outcome. Unit cost per
product is then provided so that operating units would be informed as their
target.

The budget process start with guidelines from top management which will be
used as basis for all units in preparing their required expenditures. The bulk
of activity is
Centered on the line organization, and the planning group of operation which
is normally spearheaded by the industrial engineering department. Sales
forecast then is the key element for the budgeting process and normally there
is the so called first pass of the budget, second pass, or third pass depending
on each outcome, or what if sales forecast.

iv - Ethics and social responsibility

Ethics refers to well- founded standards of right and wrong that
prescribe what humans ought to do, usually in terms of rights,
obligations, benefits to society, fairness, or specific virtues.
 Ethics is a set of principles or standards of human conduct that
govern the behavior of individuals or organizations. Using these
ethical standards, a person or a group of persons or an organization
regulate their behavior to distinguish between what is right and what
is wrong as perceived by others. It is not a natural science but a
creation of the human mind. For this reason, it is not absolute and
is open to the influence of time, place and situation.
In bygone times, kings used to keep food testers who ate the food
prepared for the king before it was offered to him. This was royal
clinical research to find out if the food was poisoned. The practice
did not raise eyebrows because the king was regarded as the most
important person in the kingdom, and his life was more precious than
that of anyone else. It was the ethics of the time.

— Ethics can be defined as the discipline dealing with moral duties and
obligation, and explaining what is good or not good for others and for
us.
— Ethics is the study of moral decisions that are made by us in the
course of performance of our duties.
— Ethics is the study of characteristics of morals and it also deals
with the moral choices that are made in relationship with others.
— Ethics is concerned with truth and justice, concerning a variety of
aspects like the expectations of society, fair competition, public rela-
tions, social responsibilities and corporate behavior.

Business Ethics
Business ethics is a form of applied ethics. In broad sense ethics in
business is simply the application moral or ethical norms to business.
Business ethics refers to a 'code of conduct' which businessmen are
expected to follow while dealing with others. 'Code of conduct' is a set of
principles and expectations that are considered binding on any person
who is member of a particular group. The alternative names for code of
conduct are 'code of ethics' or 'code o practice'.
Business ethics comprises the principles and standards that guide behavior
in the conduct of business.
 Businesses must balance their desire to maximize profits against the
needs of the stakeholders. Maintaining this balance often requires
tradeoffs. To address these unique aspects of businesses, rules - articulated
and implicit, are developed to guide the businesses to earn profits without
harming individuals or society as a whole.
The coverage of business ethics is very wide as it deals with norms
relating to a company and its employees, suppliers, customers and
neighbors, its fiduciary responsibility to its shareholders. It reflects the
philosophy of business, one of whose aims is to determine the fundamental
purposes of a company.
Business ethics stands for the saneness or purity of purpose that is
upheld through carefully designed actual practices of business enterprises.
It is an embodiment of conscience concern towards execution of business
processes in tune with the nobility of the purpose.

SCOPE OF BUSINESS ETHICS

Ethical problems and phenomena arise across all the functional areas of
companies and at all levels within the company which are discussed below
Ethics in Compliance
compliant could be to do the right thing out of the fear of being
caught rather than a desire to be abiding by the law. An ethical
climate in an organization ensures that compliance with law is
fuelled by a desire to abide by the laws. Organizations that value
high ethics comply with the laws not only in letter but go beyond
what is stipulated or Compliance is about obeying and adhering to
rules and authority. The motivation for being expected of them.

Ethics in Finance
The ethical issues in finance that companies and
employees are confronted with include:
— In accounting - window dressing, misleading financial analysis.
— Related party transactions not at arm‘s length
— Insider trading, securities fraud leading to manipulation of the
financial markets.
— Executive
compensation.
—Bribery, kickbacks, over billing of expenses, facilitation
payments.
— Fake reimbursements
Case of unethical practice
Mr. A, is a respected senior officer in the company, he
enjoyed all the benefits and perquisites from the company including
car with driver, medical facility, reimbursements of certain
expenditures.
During the months September, October, December it was
observed that his telephonic reimbursements were on a rising note,
from Rs. 500 p.m it went up to Rs. 2500 p.m. The matter was
reported and was investigated. It was found that Mr. A has made
arrangements with the Telephone Company for making a single
bill for two telephone numbers at his residence.

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 Case of unethical practice
A middle level executive, Mr. X, based in Delhi, opts for a 3 day
training program in Bangalore, which happens to be his hometown.
He also applies leave for 3 days immediately following the training
which is granted to him. Mr. X reaches the venue of the training. On
the first day, registers himself, takes the training kit, attends the
training for two hours, befriends a dealing officer and arranges to
have the presentations etc. sent to him. He does not attend the
training program thereafter.

1.1 Characteristics of Business Ethics:

A Discipline:

Business ethics are the guiding principles of business function. It

is the knowledge through which human behavior is learnt in a
business situation.

v - globalization

Globalization, is the process of interaction and integration among

people, companies, and governments worldwide. Globalization has ac-
celerated since the 18th century due to advances in transportation and
communication technology. This increase in global interactions has
caused a growth in international trade and the exchange of ideas and
culture. Globalization is primarily an economic process of interaction
and integration that is associated with social and cultural aspects.
However, disputes and diplomacy are also large parts of the history of
globalization, and of modern globalization.
Economically, globalization involves goods, services, data, technol-
ogy, and the economic resources of capital.[1] The expansion of global
markets liberalizes the economic activities of the exchange of goods
and funds. Removal of cross-border trade barriers has made the forma-

31
tion of global markets more feasible. Advances in transportation, like
the steam locomotive, steamship, jet engine, and container ships, and
developments in telecommunication infrastructure, like the telegraph,
Internet, and mobile phones, have been major factors in globalization
and have generated further interdependence of economic and cultural
activities around the globe.

VIII – GENERALIZATION:
Globalization started with the so called GATT- General
Agreement on Tariff and Trades with member countries agreeing
on elimination of Tariff imposed on products coming from other
countries basically to protect their local product. In essence it is a
concept of free competition. Then eventually it is now called the
World Trade Organization (WTO).

IX – APPLICATION
In essence, almost all countries are member of WTO, several
third world countries ask for exemption on removal of tariff on
identified products coming into their countries to protect their
local product which cannot compete because their unit cost is
higher than imported ones.

X – EXERCISES/ASSESSMENT:
1. Write the names of your group (5 students)
2. Write a list of agricultural products which are still
exempted from tariff imposition when entering our port of
entry.
3. What are the reasons why some of our agricultural products
cannot compete with imported products.

X1 – REFERENCES

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Online References

Call num- Reference Material

ber or e-
provider
Youtube
http://www.iplanner.net/download/Business-plan-template-download.pdf
Channel
Youtube
https://simplicable.com/new/product-vs-service
Channel
Youtube http://ezinearticles.com/?Why-Do-You-Want-To-Be-An-Entrepreneur?&id=418669
Channel
Youtube
Channel

On-Site References

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ber or e-
provider
HD Hisrich, R.D. (2020) Entrepreneurship, New York, NY : McGraw-Hill Education
62.5 .H625
2020

HD Habaradas, R.B., Tullao, T.S.( 2019) Pathways to Entrepreneurship, Quezon City :

62.5 .H113 Phoenix Publishing House, Inc.,
2018
HF Drury, C. (2018) Cost and Management Accounting, Australia : Cengage
5686.C8 .D8
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HD 31 .K6 Williams, Brian K. (2018) Management: a practical approach. New York, NY: McGraw-
2 2018  Hill Education 8th Edition 
HD 38.5 .F Frazelle, Edward H. (2018) Supply chain strategy: unleash the power of business integra-
869 2018  tion to maximize financial, service, and operations performance.  New York: McGraw-
Hill Education 2nd Edition 

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