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Lesson 4

The financial reality of business enterprise

If you are in business there are two basic things you ought to know about your money:

Where did it come from? Where did it go to?

In this simple style, lesson 4 will introduce you to the reality of running a small business, something which most NGO and microfinance staff have never done. The lesson will teach you how to construct simple accounts and, by following a micro-enterprise through a series of financial transactions, show how a balance sheet can be used to give a picture of a business at any time and how profit is calculated.

Picture of a poultry farmer

By replacing technical terms with everyday words and explaining concepts and financial relationships in a simple manner, we hope to show you how you can explain accounts to micro-entrepreneurs who have little or no formal education.

The lesson concludes with the construction of some accounts for a subsistence-based farming household and you will see that they are useful even in this situation.

The figures used in the calculations are extremely simplified and dollar signs are used as the currency symbol. So the amounts may bear no relationship to actual prices in your country. The important thing to remember though, is that the principles are the same.

When you have completed the lesson, you should try to watch “How to conduct the microenterprise survey” in the video section.

Teach yourself about micro finance with these free, interactive lessons.

There are 15 lessons so far, and each one should take you about an hour to complete.

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