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Entrepreneurship Chapter 1 1 The entrepreneurial process involves: developing opportunities, gathering resources, and managing and building operations, all with the goal of creating value
Name: Class: Date: chapter 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. The financial objective of increasing value is inconsistent with developing positive character and reputation. a. True b. False […]
Entrepreneurship Chapter 10 1 The valuation method involving the projection of maximum dividends involves explicitly forecasted dividends to provide surplus cash which is positive
Name: Class: Date: chapter 10 Copyright Cengage Learning. Powered by Cognero. Page 1 a. True Indicate whether the statement is true or false. 1. Surplus cash is the amount of cash required to pay scheduled dividends for the next quarter. […]
Entrepreneurship Chapter 10e In this example, the firm is currently projected to run at large unfunded losses and the plan is not a feasible financial plan
(2) What role, if any, does the $50,000 cash and the $81,900 sweat equity play in determining the post-financing ownership structure? Would the investor want less ownership if there had been two years of history rather than a year-and- a-half? […]
Entrepreneurship Chapter 10e Why do net income and cash flow in the numerical examples in this chapter both grow at the same rate (g) in the terminal value period
Chapter 10 VALUING EARLY-STAGE VENTURES FOCUS In this chapter, we introduce basic concepts of valuation, the process of estimating values. We consider the owner of a growing business who is beginning negotiations with a potential investor. We introduce the mechanics […]
Entrepreneurship Chapter 11 1 For the typical business plan having current and early cash outflows and later-stage cash inflows, the VSCS will give a higher valuation than the DDA
Name: Class: Date: chapter 11 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. For the typical business plan having current and early cash outflows and later-stage cash inflows, the VSCS will […]
Entrepreneurship Chapter 11e Describe the following terms from the perspective of venture performance: black hole, living dead, and venture utopia. In what sense is the typical business plan utopian
Chapter 11 VENTURE CAPITAL VALUATION METHODS FOCUS In this chapter, we present several variations on the simplified valuation procedures and rules of thumb frequently grouped under the designation “venture capital methods.” We introduce a three-scenario approach to examining the value […]
Entrepreneurship Chapter 12 1 The summary of the investment terms and conditions accompanying an investment proposed by the venture capitalist is known as the statement of strengths and weaknesses
Name: Class: Date: chapter 12 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. Most venture investing came from wealthy individuals and families prior to World War II. a. True b. False […]
Entrepreneurship Chapter 12e From the Headlines – Tabula: Describe the role venture capitalists played in the founding and expansion of Tabula. Comment on possible reasons for the involvement of multiple VC firms
Chapter 12 PROFESSIONAL VENTURE CAPITAL FOCUS In this chapter, we consider the highest profile segment of the venture investing markets: professional venture capital. We discuss the origins of venture capital and the periodic fluctuations accompanying major new technologies. We give […]
Entrepreneurship Chapter 13 1 Collateral plays an important role in determining the willingness to lend and the amount and terms of the loan, making it the most important factor in the lending process
Name: Class: Date: chapter 13 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. Because of loan restrictions, obtaining funding from commercial lenders is prohibitive for entrepreneurs. a. True b. False 2. […]
Entrepreneurship Chapter 13e Name three of the common loan restrictions and explain their relation to new venturing financing. What are some additional common loan restrictions
Chapter 13 OTHER FINANCING ALTERNATIVES FOCUS In this chapter, we consider a variety of government and private sources of new venture funding. We also consider financing traditionally available only to more mature ventures including commercial banking loans. LEARNING OBJECTIVES LO […]
Entrepreneurship Chapter 14 1 Registration rights embedded in a venture’s securities grant certain classes of shareholders the right, under certain circumstances, to have their securities registered with the SEC
Name: Class: Date: chapter 14 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. If a call option can be bought for $12 and the stock’s market value is $12, it’s said […]
Entrepreneurship Chapter 14e Now, estimate Wok Yow’s after-tax cost of long-term debt. Use the risk free rate, the expected market risk premium, and the risk index for the Fine Furniture Company to estimate Wok Yow’s cost of equity capital
16. [Enterprise Valuation Method] The Datametrix Corporation has been in operation for one full year (2019). Financial statements are shown below. Sales are expected to grow at a 30 percent annual rate for each of the next three years (2020, […]
Entrepreneurship Chapter 14e The enterprise value is the value of all of the securities (debt and equity). To get what’s left for the market value of equity
Chapter 14 SECURITY STRUCTURES AND DETERMINING ENTERPRISE VALUES FOCUS In this chapter, we discuss important concepts in structuring securities a venture uses to raise funds. We introduce the notion of primitive securities (like bonds and common stocks) and consider other […]
Entrepreneurship Chapter 15 1 Valuation methods that estimate a firm’s worth using value-related multiples of comparable firms are sometimes known as relative value methods
Name: Class: Date: chapter 15 Copyright Cengage Learning. Powered by Cognero. Page 1 b. False Indicate whether the statement is true or false. 1. Valuation methods that estimate a firm’s worth using value-related multiples of comparable firms are sometimes known […]
Entrepreneurship Chapter 15e It is the beginning of 2020, and the management team has $5 million of their own capital, including their share of the sales price
A. Estimate the free cash flows available to the equity investors for 2020. The following spreadsheet assumes that most accounts are a constant percent of sales (starting in 2020). We have balanced the balance sheets by raising the dividends (the […]
Entrepreneurship Chapter 15e These funding and economic issues are also complicated by the fact that the major commercial plane manufacturing industry is a duopoly
223 Chapter 15 HARVESTING THE BUSINESS VENTURE INVESTMENT FOCUS This chapter in our entrepreneurial finance text focuses on how a successful entrepreneur can harvest or exit the venture. LEARNING OBJECTIVES LO 15.1: Discuss financial decisions faced by ventures during their […]
Entrepreneurship Chapter 16 1 A private workout is a voluntary agreement between a venture’s owners and its shareholders that provides for a financial restructuring of the venture’s outstanding debt
Name: Class: Date: chapter 16 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. An involuntary bankruptcy petition is filed by the venture’s management. a. True b. False 2. A Chapter 11 […]
Entrepreneurship Chapter 16e Use the concept of cash flow insolvency over time and describe what would happen if the problem is temporary rather than permanent
Chapter 16 FINANCIALLY TROUBLED VENTURES: TURNAROUND OPPORTUNITIES? FOCUS We direct attention in this chapter toward recognizing and managing financial distress. An inability to pay creditor obligations as they come due typically poses a major financial threat and certainly distracts the […]
Entrepreneurship Chapter 1e Explain Eco-Products’ supply chain model that existed in early 2008. Describe the strengths and weaknesses of such a model from an operations viewpoint
Capstone Case 1: Eco-Products, Inc. 2008 forecast of $45 million was associated with a decline in economic activity (recession), increased competition, and a supply chain problem that made it difficult to first avoid stocking out of inventory and then accumulating […]
Entrepreneurship Chapter 1e Nearly one-half of businesses that fail do so because of economic factors including inadequate sales, insufficient profits, and industry weakness
1 C. While Accounting is the Language of Business, Cash is the Currency (Principle #3) D. New Venture Financing Involves Search, Negotiation, and Privacy (Principle #4) E. A Venture’s Financial Objective is to Increase Value (Principle #5) Chapter 1 INTRODUCTION […]
Entrepreneurship Chapter 1e The company remained a local marketer of green janitorial paper and building supplies until 2004 when the company was set on a new course with both business
CAPSTONE CASE 1: ECO-PRODUCTS, INC. End-of-Case Assignments: Suggested Discussions and Analyses A. Describe Eco-Products’ early history (1990 through 2003). Would you view the firm during that period as being a life-style business, an entrepreneurial venture, or? Why? Steve Savage and […]
Entrepreneurship Chapter 2 1 For ventures that get to market first or create intellectual property rights, it is common to price new products or services at high markups or profit margins.
Name: Class: Date: chapter 2 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. For ventures that get to market first or create intellectual property rights, it is common to price new […]
Entrepreneurship Chapter 2e Salary-replacement firms are firms that provide their owners with income levels comparable to what they could have earned working for much larger firms
17 B. Scoring a Prospective New Venture: Quantitative Screening C. Industry/Market Considerations D. Pricing/Profitability Considerations E. Financial/Harvest Considerations Chapter 2 DEVELOPING THE BUSINESS IDEA FOCUS In this chapter we examine how one can move from an idea to a determination […]
Entrepreneurship Chapter 2e Discuss the competition faced by Spatial Technology in conjunction with 3D modeling technology in general and specifically with it ACIS product
CAPSTONE CASE 2: SPATIAL TECHNOLOGY, INC. End-of-Case Assignments: Suggested Discussions and Analyses A. Describe Spatial Technology’s “business model” in terms of revenues, profits, and cash flows. Spatial is the originator of a 3D modeling file format (SAT) and object B. […]
Entrepreneurship Chapter 3 1 Trade secrets are intellectual property rights in the form of inventions and information not generally known to others that convey economic advantages to the holders.
Name: Class: Date: chapter 3 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. Financial bootstrapping maximizes the need for financial capital. a. True b. False 2. Service marks refer to services […]
Entrepreneurship Chapter 3e Describe the major taxation advantages of a limited liability company or a subchapter S corporation over a regular corporation
35 Chapter 3 ORGANIZING AND FINANCING A NEW VENTURE FOCUS In this chapter, we focus on organizing the venture, obtaining and protecting intellectual property, and early stage financing. Although an entrepreneur can change the legal form of the venture in […]
Entrepreneurship Chapter 3e Use the tax rate schedules presented in the chapter to estimate the dollar amount of taxes that would have to be paid in each year by the Hair Care Products Company
Chapter 3: Organizing and Financing A New Venture 47 6. [Income Taxes] In the second year of operation, the Capital-Ideas Company forecasts revenues to grow to $5 million dollars, and expenses before income tax to be 70 percent of revenues. […]
Entrepreneurship Chapter 4 1 Net income, or profit, is the bottom-line measure of what’s left from the firm’s net sales after operating expenses, financing costs, and taxes have been deducted
Name: Class: Date: chapter 4 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. Operating income, or earnings before interest and taxes, reflects the firm’s profit after all operating expenses, excluding financing […]
Entrepreneurship Chapter 4e Accrual accounting is the practice of recording economic activity when it is recognized rather than waiting until it is realized
56 Chapter 4 PREPARING AND USING FINANCIAL STATEMENTS FOCUS In this chapter, we introduce basic accounting and financial statements designed to help ventures monitor their progress. We stress the need to understand how cash is built and burned both in […]
Entrepreneurship Chapter 4e For analysis and reference purposes Jen and Larry’s Frozen Yogurt Company income statements and answers for (A) through (J) are shown below in spreadsheet
Chapter 4: Preparing and Using Financial Statements 67 See spreadsheet calculations below. F. If Castillo had a net cash burn from operating and investing activities in 2019 divide the amount of burn by 12 to calculate an average monthly burn […]
Entrepreneurship Chapter 5 1 Financial ratios are a useful way to summarize large amounts of financial data to simplify comparisons of a venture’s performance with itself and other firms over time
Name: Class: Date: chapter 5 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. The equity multiplier is considered an efficiency ratio. a. True b. False 2. During the development and startup […]
Entrepreneurship Chapter 5e Convert the annual cash build and cash burn amounts calculated in Part B to monthly cash build and cash burn rates
Chapter 5: Evaluating Operating and Financial Performance 84 Changes in Payables and Accrued Liabilities = [($180,000 – $130,000) + ($70,000 – $50,000)] = $70,000 B. Assume that 2020 will be a repeat of 2019. If your answer in Part A […]
Entrepreneurship Chapter 5e Describe the types of financial ratios and other financial performance measures that are used during a venture’s successful life cycle
71 Chapter 5 EVALUATING OPERATING AND FINANCIAL PERFORMANCE FOCUS In this chapter, we focus on identifying and understanding the financial ratios used to evaluate the venture’s financial performance over time. Venture performance and efficiency is important to a variety of […]
Entrepreneurship Chapter 6 1 The actions of monitoring financial performance, projecting cash needs, and obtaining first-round financing occurs during a venture’s survival stage.
Name: Class: Date: chapter 6 Copyright Cengage Learning. Powered by Cognero. Page 1 sometimes for two or more years. Indicate whether the statement is true or false. 1. Short-term financial planning typically involves preparing monthly financial statements and focuses on […]
Entrepreneurship Chapter 6e Prepare monthly income statements, balance sheets, and statements of cash flow for the first six months of 2021
Chapter 6: Managing Cash Flow 105 2018 2019 Accounts payable 300 400 Bank loan 150 250 Accrued liabilities 100 150 Total current liabilities 550 800 Long-term debt 150 150 Common stock 850 1,100 Retained earnings 1,850 2,450 Total liabilities and […]
Entrepreneurship Chapter 6e Besides the cash budget, what additional financial statements are projected monthly in conjunction with short-term financial planning conjunction with short-term financial planning
89 Chapter 6 MANAGING CASH FLOW FOCUS In this chapter, we focus on short-term financial planning involving projecting monthly financial statements for one year or less. The availability of cash is what drives the entrepreneurial venture. Inadequate cash often constrains […]
Entrepreneurship Chapter 7 1 A venture’s riskiness in terms of the likelihood of poor performance or failure decreases as it moves from its development stage to its rapid-growth stage. development stage to its rapid-growth stage
Name: Class: Date: chapter 7 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. Liquidity premiums reflect the risk associated with firms that possess few liquid assets. a. True b. False 2. […]
Entrepreneurship Chapter 7e Explain the meaning of investment risk of loss and describe how risk can be defined relative to an average value
119 Chapter 7 TYPES AND COSTS OF FINANCIAL CAPITAL FOCUS In this chapter, we characterize financial markets and focus on developing an understanding of the how one obtains and pays for financial capital. Without adequate capital, even the best ideas […]
Entrepreneurship Chapter 7e Voice River, Inc. has successfully moved through its early life cycle stages and now is well into its rapid growth stage
Liquidity Premium, Advisory Premium, Hubris Projections Premium. See part C for the levels of these premia. C. What overall venture investment discount rate would be used by the VentureBanc? 11. [Weighted Average Cost of Capital] Kareem Construction Company has the […]
Entrepreneurship Chapter 8 1 The objective of the Jumpstart Our Business Startups (JOBS) Act of 2012 is to stimulate the initiation, growth, and development of small businesses
Name: Class: Date: chapter 8 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. It is usually easier to transfer ownership in a proprietorship relative to a corporation. a. True b. False […]
Entrepreneurship Chapter 8e Briefly describe what is meant by an intrastate offering. What are the major difficulties in assuring that an offer is intrastate
133 Chapter 8 SECURITIES LAW CONSIDERATIONS WHEN OBTAINING VENTURE FINANCING FOCUS In this chapter we introduce several major legal aspects of fundraising for the new venture. We discuss the central role of the Securities Act of 1933 and the exemptions […]
Entrepreneurship Chapter 9 1 The added costs associated with obtaining equity capital are based on investor expected rates of return and are explicit costs which affect AFN
Name: Class: Date: chapter 9 Copyright Cengage Learning. Powered by Cognero. Page 1 Indicate whether the statement is true or false. 1. The cost of obtaining additional funds, such as additional interest expenses from borrowing funds, may be explicit and […]
Entrepreneurship Chapter 9e Show how your spreadsheet model projections will change if the AFN from Part B is financed by issuing additional long-term debt at a 10% interest rate
6. [Multi-Year Financial Statement Projections] The Minoso Corporation anticipates a 20 percent increase in sales for 2020, 2021, and 2022. Minoso is currently operating at full capacity and thus expects to increase its investment in both current and fixed assets […]
Entrepreneurship Chapter 9e Explain how the AFN equation can be used to forecast the amount of funds that will be needed over a several year period
Chapter 9 PROJECTING FINANCIAL STATEMENTS FOCUS In this chapter, we focus on projecting financial statements for several years into the future. Inadequate financial resources often constrains the venture’s ability to grow, is a primary cause LEARNING OBJECTIVES LO 9.1: Discuss […]