entrepreneur Simulation

ENTREPRENEUR STUDENT MANUAL 5

Entrepreneur Case

ENTREPRENEUR

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You are purchasing a store that sells casual clothes, a specialty business in the retail apparel industry with a long history in the local community. It has been a family-owned business for many years, selling tops and pants for work and recreation at moderate prices. The youngest members of the family pursued careers in other fields, and the retiring owners are interested in selling the business to ambitious entrepreneurs who can update the image and carry the business forward.

Location The store has been in the same location for many years, across from the college campus. The college location appeals to the student population, and there is a fair amount of trade from surrounding neighborhoods. Rent is $5,000 per quarter, and the store is about 1,500 square feet, including both display area and storage space. While parking is limited, foot traffic in the area is constant, and the previous owners have been moderately successful in this location. Their sales last year were $400,000, and their after-tax profit was just over $11,000. The lease expires now, so you have the opportunity to renew the lease at the current rent or relocate. If you plan to continue selling a medium-priced casual line of clothing, then staying at the college location should be a good choice. On the other hand, if you are targeting a different customer base, another location might make more sense. Small retail apparel stores can be found in a variety of locations. Although they are most prevalent in retail malls, successful operations can be found in shopping plazas, downtown stores, and other types of retail space (e.g., adjacent to drive-in grocery convenience stores, former gas stations, and hotel arcades). Each type of location attracts a unique clientele, and it is important to be able to identify which population your store is serving and whether there is a large enough segment available to generate profits. Consider the customer base and segment population in your location and be aware of their needs and expectations. The average floor space required for this type of retail outlet is 1,000 to 2,000 square feet with additional stockroom space of 500 to 1,500 square feet. In addition to the college location, you have three other choices, as described next.

• You may lease space in a shopping center located in a newly developed subdivision, about a mile from the college. The rent is $6,000 per quarter for 2,000 square feet. The Merchants Association at the center provides a moderate amount of free advertising through flyers. Parking is close and plentiful.

• A store along the main street of the town is available for lease at $6,000 per quarter. The street is steadily becoming a shopping area; many stores are moving there and making improvements. There is parking along the street and in back of the stores. Other merchants report there is usually enough parking available. The store is 1,800 square feet.

• A corner property between the college and downtown is available. It currently has a closed service station on it, but the owner will convert it to a retail store of 1,500 square feet with new interior and exterior. There is parking for several cars, and it is located on a busy intersection with good

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visibility. The landlord will rent it at $4,000/quarter for the first year, with a clause to raise the rent in the second year to no more than $4,500.

None of the locations are inherently bad, but one choice may be better than the others depending on your product line, price range, and customer base. Your team needs to choose the location carefully, since you will not be able to change it after the start of the simulation.

Product Line The tops and pants store that you will be operating is a specialty business in the retail apparel industry. Retailers report that they carry several types of pants and an equivalent array of tops, depending on the clientele they wish to attract. The type of population or market segment will affect the type of inventory carried in an individual store. Although the early entrants in this market limited their inventory to jeans, most of the successful operations have broadened their offerings to include a variety of styles of pants and tops (jeans, slacks, fatigues, T-shirts, blouses, casual shirts, etc.). This provides a more complete product mix for customers. Depending on your local market, your team may wish to offer a specialty line of garments, such as ethnic, designer, or uniforms for healthcare, food, and other service professionals. Your store’s relationship with its suppliers is excellent. Your primary vendor has offered to replace the existing stock if you change your product line when you take over the business, as long as the product is in the same price range. You can choose one of the following lines of clothing.

• Ethnic: You can choose to sell specialty clothing specific to a region or ethnicity. This includes African, Asian, and Hispanic styles, as well as Western Cowboy.

• Casual: Your current inventory is casual clothing for the contemporary shopper. It includes jeans,

t-shirts, sweaters, and sports apparel.

• Designer: Designer clothes display the label or logo of a fashion designer. Designer brands use name recognition to help sell the pants and tops.

• Ultra-Trendy: Ultra-trendy apparel appeals to the more fashion-conscious buyer. It includes pants

and tops that are the latest fad, as well as higher fashion clothing.

• Uniforms: The uniforms line provides apparel for healthcare, food, and other service professionals. This choice includes a casual line of surgical scrubs.

You can be successful with any of the product lines, though you need to coordinate your choice with your location and target customers. While you may change to any of the product lines at any time, you will be charged a 10% restocking fee for your inventory of old product. Also, keep in mind that when you switch clothing lines, it will take some time to reach normal sales volume. Frequently changing your product line will confuse customers.

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Business Name One of the most important decisions an entrepreneur makes is naming the business. This is also a legal issue since names are usually registered in a governmental office for the locale in which the business operates. Once your business has a new name, the image and reputation for the store immediately begins to take form. Although it is possible to rename your business if the first name selected turns out to be unsatisfactory, it is important to select a name that will stand the test of time. It should also be adaptable to a new product line if you desire to change the line sometime during simulation play. Factors you may want to take into consideration in naming your business and some good/bad examples follow.

• Is the name descriptive of what you sell?

Campus Clothing Corner vs. The Corner Store • Does it avoid meaningless words or initials?

The Jeans Shop vs. The JGD Shop • Is the name distinctive and easy to remember?

Jerry’s Jeans vs. Emily Lanahan’s Clothing Store • Does the name adapt to changes in products?

Casual Clothes, Etc. vs. Just Tops

Of course, some of these factors have conflicting requirements. It can be difficult to come up with a name that is both descriptive and flexible. You will need to determine which factors are most important for your store’s image. In any event, be sure to choose a business name that is descriptive, yet flexible.

Finance Sales for the past four quarters have ranged from $80,000 in the first quarter (January–March) to $110,000 in the fourth (October–December), with average quarterly revenue of $100,000. After-tax profit for the year was about $11,200. Your accountant has audited the books and believes that the business is a healthy going concern, especially since it could be operated more efficiently than it had been by the previous owners. In her opinion, the purchase price of $55,000 is fair since it includes $21,000 in inventory, equipment valued at $8,400, some residual advertising, and the good reputation of the firm. The following is a summary of the income statement for last year, along with the balance sheet at of the end of the year.

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Figure 1: Income Statement (last year)

Gross Revenue $400,000 100.0% Cost of Goods Sold $200,000 50.0% Gross Margin $200,000 50.0% Marketing $45,000 11.3% Staffing $96,000 24.0% Overhead & Other $43,000 10.8% Total Expenses $ 184,000 46.0% Profit Before Taxes $16,000 4.0% Less Tax (30%) $4,800 1.2% Profit after Taxes $11,200 2.8%

Figure 2: Balance Sheet (end of year)

Cash $6,600 Loans Payable $8,000 Rent Deposit $5,000 Total Liabilities $8,000 Inventory $21,000 Equipment $12,000 Retained Earnings $33,000 Depreciation $3,600 Total Equity $33,000 Net Equipment $8,400 Total Assets $41,000 Total Liab. and Equity $41,000

Your team must put together $75,000 to get the business started: $55,000 to purchase the business, $10,000 for rent deposit, and $10,000 in working capital. There are several ways to raise the capital needed, including selling stock (to the team members, friends or an angel investor) and borrowing the balance of funds needed. Your team has formed a corporation and has “pooled resources” of $50,000 that will become the equity in the business—that is, 5,000 shares of common stock will be issued at $10 a share, for $50,000 in equity. For the remaining $25,000, you have three options.

• You have been pre-approved for a $25,000 loan at 8% interest from a local bank through a program with the Small Business Administration. In addition to the interest due, the bank will automatically deduct $2,500 each quarter for principal reduction. This loan is a good choice for those who want to have scheduled payments to pay back their debt.

• A parent of one of the stockholders will grant a $25,000 loan to the company at 10% interest. The terms require you to pay quarterly interest, but you can repay the loan principal at any time. This is an interest-only loan; it is up to you to make principal repayments to reduce the debt. While

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the interest rate is higher than the bank loan, you will have more flexibility in managing your cash flow.

• An angel investor has offered to buy 50% of the stock shares for $25,000; the team would then

control the remaining 50% of the stock. The total number of shares would remain at 5,000. Advantage: no loan interest or loan principal to pay each quarter. If additional funds are needed, a bank will loan funds at 12% interest, and an automatic $2,500 loan payment on principal will then be imposed.

In addition to cash to purchase the business, you will need working capital to operate it. Liquid assets are required for everyday business functions: adding employees, purchasing inventory, paying utilities and rent, etc. While you start with $10,000 in working capital, there may be times when cash gets tight and you need additional funds. In that case, your lender will advance you additional funds from a line of credit, charging you a one-time fee of 3% of the advance, plus interest at the regular annual rate (8%, 10%, or 12%, depending on your financing choice).

Inventory Management Good inventory management is critical to running your business. Before you can sell to customers each quarter, you will need to purchase tops and pants. You must pay for your purchases in the quarter you order them, and the value of the unsold product will be shown as an asset on the inventory line of the balance sheet. Buying too much product can cause problems with cash flow, so you will need to coordinate your sales projections with your product purchases to avoid running short of cash. Buying too little means customers will not be able to find the items they’re looking for. Also, keep in mind that the appearance of your store can affect sales. Both overstocked, crowded shelves and under-stocked shelves with poor selection can hurt sales. The previous owners typically maintained 40 to 45 days of inventory. Sales forecasting is difficult, especially when you do not have a sales history to review. The previous owners averaged about $100,000 in sales per quarter, or about 2,000 tops and 2,000 pants in the medium price range per quarter. Keep in mind that this is an average, and demand will be lower in the first quarter of the year (January–March) than around the holiday season (October–December). Demand for your products will also vary with your choice of pricing (low, medium, high), and you should also not expect to sell exactly the same number of tops as pants, so be sure to adjust your forecast, keeping all these factors in mind. While your initial forecast may be off a bit, your projections will improve as you gain experience. Whenever merchandise is displayed on open shelves and available for customer handling, there is the possibility of it becoming soiled, stolen, lost in some way (getting swept off into the waste can) or returned for credit. Goods are often pushed back on shelves, in drawers, or in the stockroom until they are out of season and it is too late to have an end-of-season sale. No money is received for these items, and they are written off the inventory at cost, with the expense assigned to shrinkage. The more inventory you carry, the higher your shrinkage.

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Hours Your store should be open at times that are convenient to customers. While longer hours will provide more convenience for your customers, they will also require more staff. The former owners kept their shop open 10 hours per day, but you have the option to be open as few as 8 hours each day or as many as 12 hours. You will have to decide if it is better to be open more or fewer hours, based on customer traffic at your store and the cost of staffing.

Return Policy Your team will need to decide on the type of return policy your store will have. As you have likely experienced yourself, there can be a vast difference in return policies from one store to another. A stringent policy could result in somewhat fewer sales but will reduce shrinkage. A liberal policy will please customers but increase shrinkage. You may change your policy in the future, but for customer satisfaction, you should not change frequently without thoughtful reasons.

Pricing Prices must be established for pants/jeans as well as tops/blouses/shirts. Markup is the amount added to the cost of goods to establish the selling price of a product. This is usually 100% of cost, meaning if the wholesale cost of the item is $10, the retail price will be $20 ($10 + 100% x $10 = $20). However, retailers often express markup as a percentage of retail price, in which case a product that cost $10 and retails for $20 has a markup of 50% of retail ($10 ÷ [100% - 50%] = $20). Retail outlets occasionally take advantage of buyouts of job lots and pass the savings on to their customers at the same profit margins as the regular stock. These are commonly advertised as “special buys.” The previous owners of the store offered medium-priced clothing for sale (around $20 for tops, $30 for pants). You will have the option of offering low ($10–14 tops, $20–24 pants), medium ($18–22 tops, $28–32 pants), or high-priced ($26–30 tops, $36–40 pants) apparel in your store. Your choice will affect the quality of the products you purchase and should target the population to whom you are trying to sell. In the simulation, any time you change the price range (e.g., from medium to low), you will need to return your existing inventory and pay a 10% restocking fee, which will be charged to “other expense.” You must then order more product of the appropriate quality to replenish your stock. You may price your tops in a different range from your pants, but if the difference is too great, it could affect customer perception of your products, and sales may suffer.

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Marketing It is important that your store communicates value to its customers. The right mix of products, competitive prices, a courteous and efficient staff, and effective marketing can maximize sales. Build a marketing strategy that promotes customer awareness in your community with the appropriate advertising media for the population segment you are targeting. Remember that your store can create a positive image or marketing presence through effective advertising. Retail apparel outlets advertise their merchandise in a number of ways. The most common is newspaper advertising that is prepared by an agency and paid for as an expense of the business. In addition, a manufacturer may provide co-op advertising if the retail outlet is carrying an item that the manufacturer selects for promotion. Advertising of this type (that promotes the item rather than the store) can save the retailer about 50% in advertising costs and provide a residual image to consumers. An example is a Levi-Strauss promotion of a new line of jeans with an announcement that they can be purchased at a specified outlet. Some shopping centers include “flyer” advertising as a benefit of tenancy; alternatively, some shopping centers require that tenants participate in promotions and charge for the advertising. Clothing retailers are able to reach their target segments effectively through this flyer type of publication, if they have chosen their location wisely. Other forms of advertising are effective only if the media are chosen carefully for their reach/cost relationship. For example, the campus newspaper may reach students, but have trouble reaching the typical downtown customer. When trying new media, it is recommended that you do not use a random, unthinking method of making decisions, but rather plan to hold certain variables constant while manipulating others. This allows you to begin to determine which marketing elements are more effective in generating sales. Expect to spend from 5% to 10% of gross sales on advertising. Below is a table with descriptions of the advertising options, all of which are implemented with the help of professionals.

Advertising Type Cost Description Website $4,000 Includes domain name, hosting, content with current line and

promotions, and search engine optimization. Radio $4,016 Run 30-second spot several times a day on a radio station.

Anticipated reach is 5,000–10,000 listeners. Television $8,128 Covers production and running of 15 second ad on local TV. Run

every other week to increase frequency. Social Media $3,004 Use of two social media accounts to keep customers up to date

about promotions and new product offerings. Community Newspaper $6,064 Quarter page ad run several times a week in local newspaper

with circulation of around 15,000. Campus Newspaper $1,601 Eighth page ad run once a week. Reaches around 5,000 readers,

mainly students and faculty.

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Advertising Type Cost Description Direct Mail $3,209 Combination of postcard mailings to local residences and

purchase of a targeted contact list for email. Flyers $2,002 Production and posting of 1,000 flyers around town advertising

your business. While advertising can help get customers into the store, promotional activity will help get product into their hands. End-of-season reductions run approximately 10–35% off the retail selling price, producing narrow profit margins on sale merchandise, and are accounted for on the income statement as a promotion expense. The promotion budget is also used to create attractive displays. As a guide, you should spend from $500 to $5,000 on promotion. For example, $2,500 would allow you to run a 10% sale on select items and update your displays.

Staffing Smaller retail pants and tops outlets of this size typically have a sales force of two people at all times, except for weekend afternoons and peak seasons such as “back-to-school” and Christmas rush when more salespeople are necessary. Staffing includes a full-time manager or assistant manager at all times, but you will need to hire additional part-time help to sufficiently staff the store. Part-timers work 15 hours per week, and the number of workers you need will vary, depending on the number of hours you are open as well as the time of year. For the average quarter, if you are open 10 hours per day (60 hours a week), you will need 4–5 part-timers to bring the store to full staff. Insufficient staff will result in lost sales when customers cannot find assistance, while having too many staff may overwhelm customers and be unproductive. If there is not enough sales help on the floor, there is a greater chance of shoplifting. Inexperienced, overworked, or lower-paid sales clerks will also be less inclined to notice shoplifting or incorrectly stored goods. Full-time staff cost is fixed at $15,000 per quarter, which covers salary, vacation, and sick pay benefits. You may have the option to add health benefits at some point in the simulation. Part- time staff receive no benefits, but you need to decide on their hourly wage. Higher wages will attract better employees, which may be especially important when selling higher-end products. In addition to wages and salaries, your payroll costs include a 10% tax to cover social security and accident insurance. New hires will need training to get up to speed working in the store. Even experienced employees benefit from extra training, which can show them better ways to handle their job. Each quarter, you should expect to spend $100–$200 on training for each new hire and $50–$100 for existing staff.

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Overhead and Other Expenses Overhead refers to the ongoing expense of operating your business, regardless of the level of sales. Each quarter you will need to pay a fixed amount for rent (which includes electric and water), telephone, and insurance. Telephone expense is estimated at $600 per quarter. The basic insurance cost of $700 includes group life and disability for full-time employees, and store liability, but not property insurance to cover loss in case of fire or storms. You may have the opportunity to buy a separate insurance policy to cover property loss as a one-time “incident” decision. The simulation assumes that 70% of your sales will be by credit card. The credit card company will charge a 4% service fee on all credit card sales. Therefore, if you have sales of $100,000, the bank will charge 4% of $70,000, or $2,800 for the quarter. From time to time you may incur expenses that do not fit one of the regular categories. For example, your response to certain incidents may involve a cost, and returning inventory when you change the quality of your stock (due to a price level change) will result in a one-time restocking fee. These kinds of costs will be shown as “other expenses” on your income statement.

Incidents If your instructor selects this option, each simulated quarter you will have an “incident” which you will need to address. An incident is like a mini-case. Your team will need to discuss the issue presented and enter an appropriate response. Consider your options carefully as incident decisions cannot be undone. Any costs associated with an incident will automatically appear on the income statement under “other expenses.”

Reports An entrepreneur must think about the integration of business decisions. When reviewing your pricing decisions, can you determine the impact a change in price has on other functional areas of your business? What impact does it have on product demand? ...on staffing needs? ...on your product purchases? ...on your net income? As the owner of a small retail clothing store, you must make sure that all functional areas of your business are in line with your firm’s overall objectives and that all of your decisions are integrated—working toward producing the desired results. There are a number of reports you can use to track performance as you operate your business. These include the Balance Sheet, Income Statement, Cash Analysis, and Inventory reports. You can access these reports from the Company menu category. Be sure to check the Dashboard as well for tips on running your business, alerts about upcoming decisions, and feedback on issues in the store.

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The Inventory report gives an accounting of your stock of tops and pants, showing purchases, sales, and shrinkage. By keeping a close watch on the report, you can monitor your inventory and become more effective with your purchasing practices. You will want to manage inventory efficiently to minimize your cost while providing an attractive array of goods to the consumer. The days inventory is especially helpful in determining if you have the “right” amount of product on hand. In the simulation, a value of 45 days is a good target. The Cash Analysis shows the sources and uses of cash in running your store. When you purchase product, pay employees, advertise, and pay rent and utilities, cash goes out. When you sell tops and pants, cash comes in. Monitoring your cash balance will give you a good idea of how good a job you are doing at keeping a positive cash flow. Note that cash going out is not always the same as an expense. For example, when you purchase more product, you are exchanging one asset (cash) for another (inventory). Only when you sell your inventory will the cost of goods be booked as an expense. You must keep at least $2,000 in cash on hand for operating expenses. If you fall below the minimum, cash will be brought up to $2,000 using a draft on the line of credit, and the borrowed amount will be added to your loan balance. Any cash over $2,000 will be invested in a money market fund and the interest will appear on the income statement the following period. In addition to your cash flow, you will want to keep track of the bottom line—your after-tax profit. The Income Statement provides a summary of the revenues and expenses each quarter and how profitable your business was for the quarter. Use the sales line items for tops and pants to identify sales trends. Tracking marketing and staffing expenses as a percent of revenue over time is a good way to monitor the effectiveness of your decisions in those areas. The Balance Sheet provides a summary of your assets and liabilities, as well as your equity in the company. It includes several current assets: cash, money market funds, rent deposit, and the value of inventory (at cost). It also includes fixed assets under equipment, which is depreciated. Since the property is leased, it is not included as a fixed asset. Your liabilities include any unpaid loan balance. Owner’s equity includes the stock that you sold and retained earnings. Retained earnings are the total profits of the firm, to date, less any dividends that were paid. If you are playing in competitive mode, a market research firm will conduct studies of the local clothing stores and sell information to you as needed, after the first quarter. The cost varies from $100 to $400 per report each period. Your firm may purchase these reports to learn how your competitors are positioned. Selecting the appropriate market research report can aid in compiling decision data. Such data will keep your firm informed about unit sales and pricing, product line, and marketing expenditures for each competitor in your industry.

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ROI = cumulative profit / investment

Performance Measures There are several measures you can use to track performance as you operate your business. The first is your sales revenue. Since seasonality can affect performance independent of your decisions, it is best to compare current sales with the previous year’s sales during the same quarter. Unfortunately, that is not possible in your first year of operation, so an alternative would be to track sales per employee. To do this, you will need to convert the hours worked by part- time employees to the equivalent of full-time employees, then divide sales by the calculated number of full-time employees. Since you have two full-time employees, the full calculation is shown below: Tracking profit after taxes each quarter will give you a good idea of overall performance, but you may also want to calculate return on sales (ROS) to measure the efficiency of your business. This ratio shows how much profit you are making per dollar of sales, and is calculated by dividing profit by revenue. Both numbers can be found on the Income Statement, though you will need to add sales of tops and pants to get total revenue. Return on sales will vary by industry, but in Entrepreneur an ROS of 7% indicates an efficient operation. Return on investment (ROI) is another useful profitability measure. It allows you to compare the profitability of your company with other investment opportunities. This measure divides the cumulative profit of the store by the investment made to acquire the business. Both numbers are found on the Balance Sheet, with the stock line item showing the investment, and the retained earnings the cumulative profit, though you will need to add back any dividends distributed. The calculation is: In order to purchase the store, your team contributed $50,000 in exchange for 5,000 shares of stock at $10 per share. If you choose the angel investor option to finance the rest of the purchase, then 2,500 of those shares will be sold to the investor for $25,000. In any case, $10 will be the starting stock price. You can check how you are doing by comparing your stock price in a given quarter with its starting price. Although the company is actually “private” (i.e., the stock does not sell actively on the open market), it will be assumed the stock does have value in the over-the- counter market. Investor whims concerning poor performance one quarter could make the stock price decline, perhaps more than it should. Investors may not know of the firm’s overall plans and what it is

Sales per Employee = total sales / ( PT employees × 15/40 + 2 FT )

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trying to accomplish, thus undervaluing the stock. The point is that you need to continue to operate your company as best you can, regardless of the stock price. Some of the factors that affect stock price are:

• Total sales • Return on sales (profit divided by total sales) • Customer satisfaction (optimum inventory and good service) • Company image (advertising, promotion, good business ethics) • Dividends paid

Next Step The small retail clothing store is in a stable segment of the retail clothing business and can be operated profitably, if organized and managed efficiently. What you learn, and the challenges you face in the Entrepreneur simulation, are adaptable to many types of businesses and situations. Any entrepreneur who attempts to operate a profitable business will face similar circumstances. The simulation provides you with an opportunity to manage a retail specialty- clothing store, make decisions, test marketing options, and make mistakes—all without any actual money being spent. Now that you have some background on the general context of Entrepreneur, we wish you success in running your retail clothing store!

Decision Description Value Ranges Company

Name Enter a name for your business before making the first period decision. Up to 30 characters.

Location The existing location is near the college. You can move to a different location when you acquire the business.

Choose: College, Shopping Center, Main St., or Corner

Financing You need to raise $25,000 in addition to a $50,000 investment.

Choose: Bank Loan, Personal Loan, or Angel Investor

Product Line The store you are acquiring sold casual clothing. You can choose another product line at start-up, or change the line at a later time.

Choose: Ethnic, Casual, Designer, Trendy, or Uniforms

Hours Open Select the number of hours to be open each day. 8–12 Product

Purchase Tops and pants must be purchased each quarter to provide stock for the store. 0–10,000

Return Policy Customers are more likely to shop at the store if it has a generous return policy, while a more restrictive policy can reduce shrinkage.

Choose: no receipt, 30 days, 10 days, 10 days if defective, or 7 days if defective

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Decision Description Value Ranges

Tops Price Choose a price range (low, medium, high) and price for your tops. This represents an average for tops sold.

Low: $10–14 Med: $18–22 High: $26–30

Pants Price Choose a price range (low, medium, high) and price for your pants. This represents an average for pants sold.

Low: $20–24 Med: $28–32 High: $36–40

Advertising Advertising makes potential customers aware of your store. Select media options appropriate for your location and target market.

Choose 0 or more: Website, Radio, Television, Social Media, Community News, Campus News, Direct Mail, Flyers

Promotion Promotion spending is used for special discounts and displays. $0–25,000

Hiring The store has two full-time employees, but requires part-time staff to help serve customers. Use a negative number to fire staff.

0–20 for hiring; fire zero to current number of part-timers

Hourly Wage Part-time staff are paid an hourly wage. Higher wages may attract more qualified employees and reduce turnover.

$8–25/hour

Training Training employees helps with customer experience, shrinkage, and retention. $0–10,000

Dividend Profits distributed to stockholders. $0–quarterly profit Extra Loan Payment

If there is a loan outstanding, extra payments can be made to reduce the balance. $0–loan balance

Incident Each period you may have to respond to issues raised by an “incident” (mini-case).

Choices vary by incident.