SOLUTION MANUAL For Entrepreneurial Finance, 7th Edition
by J. Chris Leach, Ronald W. Melicher, Chapters 1 - 16,
Complete With CAPSTONE CASES
,TABLE OF CONTENTS
u u u
Part u1: uTHE uENTREPRENEURIAL uENVIRONMENT.
1. uIntroduction uto u
Finance ufor uEntrepreneurs.
2. uDeveloping uthe uBusiness uIdea.
Part u2: uORGANIZING uAND uOPERATING uTHE uVENTURE.
3. uOrganizing uand uFinancing ua uNew uVenture.
4. uPreparing uand uUsing uFinancial uStatements.
5. uEvaluating uOperating uand uFinancial uPerformance.
Part u3: uPLANNING uFOR uTHE uFUTURE.
6. uManaging uCash uFlow.
7. uTypes uand uCosts uof uFinancial uCapital.
8. uSecurities uLaw uConsiderations uWhen uObtaining uVenture uFinancing.
Part u4: uCREATING uAND uRECOGNIZING uVENTURE uVALUE.
9. uProjecting uFinancial uStatements.
10. uValuing uEarly-Stage uVentures.
11. uVenture uCapital uValuation uMethods.
Part u5: uSTRUCTURING uFINANCING uFOR uTHE uGROWING uVENTURE.
12. uProfessional uVenture uCapital.
13. uOther uFinancing uAlternatives.
14. uSecurity uStructures uand uDetermining uEnterprise uValues.
Part u6: uEXIT uAND uTURNAROUND uSTRATEGIES.
15. uHarvesting uthe uBusiness uVenture uInvestment.
16. uFinancially uTroubled uVentures: uTurnaround uOpportunities?
Part u7: uCAPSTONE uCASES.
Case u1. uEco-Products, uInc.
Case u2. uSpatial uTechnology, u
,Chapter u1
INTRODUCTION uTO uFINANCE uFOR uENTREPRENEURS
FOCUS
The upurpose uof uthis ufirst uchapter uis uto upresent uan uoverview uof uwhat uentrepreneurial ufinance uis
uabout. uIn udoing uso uwe uhope uto uconvey uto uyou uthe uimportance uof uunderstanding uand uapplying
uentrepreneurial ufinance umethods uand utools uto uhelp uensure uan uentrepreneurial uventure uis usuccessful.
uWe upresent ua ulife ucycle uapproach uto uthe uteaching uof uentrepreneurial ufinance uwhere uwe ucover
uventure uoperating uand ufinancial udecisions ufaced uby uthe uentrepreneur uas ua uventure uprogresses ufrom
uan uidea uthrough uto uharvesting uthe uventure.
LEARNING uOBJECTIVES
LO u1.1: uCharacterize uthe uentrepreneurial uprocess.
LO u1.2: uDescribe uentrepreneurship uand usome ucharacteristics uof uentrepreneurs.
LO u1.3: uIndicate useveral umegatrends uproviding uwaves uof uentrepreneurial uopportunities.
uLO u1.4: uList uand udescribe uthe useven uprinciples uof uentrepreneurial ufinance.
LO u1.5: uDiscuss uentrepreneurial ufinance uand uthe urole uof uthe ufinancial umanager.
uLO u1.6: uDescribe uthe uvarious ustages uof ua usuccessful uventure‘s ulife ucycle.
LO u1.7: uIdentify, uby ulife ucycle ustage, uthe urelevant utypes uof ufinancing uand uinvestors.
uLO u1.8: uUnderstand uthe ulife ucycle uapproach uused uin uthis ubook.
CHAPTER uOUTLINE
1.1 THE uENTREPRENEURIAL uPROCESS
1.2 ENTREPRENEURSHIP uFUNDAMENTALS
A. Who uis uan uEntrepreneur?
B. Basic uDefinitions
C. Entrepreneurial uTraits uor uCharacteristics
D. Opportunities uExist uBut uNot uWithout uRisks
1.3 SOURCES uOF uENTREPRENEURIAL uOPPORTUNITIES
A. Societal uChanges
B. Demographic uChanges
C. Technological uChanges
D. Emerging uEconomies uand uGlobal uChanges
E. Crises uand u―Bubbles‖
F. Disruptive uInnovation
1
, 1.4 PRINCIPLES uOF uENTREPRENEURIAL uFINANCE
A. Real, uHuman, uand uFinancial uCapital umust ube uRented ufrom uOwners u(Principle u#1)
B. Risk uand uExpected uReward ugo uHand uin uHand u(Principle u#2)
C. While uAccounting uis uthe uLanguage uof uBusiness, uCash uis uthe uCurrency u(Principle u#3)
D. New uVenture uFinancing uInvolves uSearch, uNegotiation, uand uPrivacy u(Principle u#4)
E. A uVenture‘s uFinancial uObjective uis uto uIncrease uValue u(Principle u#5)
F. It uis uDangerous uto uAssume uthat uPeople uAct uAgainst uTheir uOwn uSelf-Interests
u(Principle u#6)
G. Venture uCharacter uand uReputation ucan ube uAssets uor uLiabilities u(Principle u#7)
1.5 ROLE uOF uENTREPRENEURIAL uFINANCE
1.6 THE uSUCCESSFUL uVENTURE uLIFE uCYCLE
A. Development uStage
B. Startup uStage
C. Survival uStage
D. Rapid-Growth uStage
E. Early-Maturity uStage
F. Life uCycle uStages uand uthe uEntrepreneurial uProcess
1.7 FINANCING uTHROUGH uTHE uVENTURE uLIFE uCYCLE
A. Seed uFinancing
B. Startup uFinancing
C. First-Round uFinancing
D. Second-Round uFinancing
E. Mezzanine uFinancing
F. Liquidity-Stage uFinancing
G. Seasoned uFinancing
1.8 LIFE uCYCLE uAPPROACH uFOR uTEACHING uENTREPRENEURIAL uFINANCE
uSUMMARY
DISCUSSION uQUESTIONS uAND uANSWERS
1. What uis uthe uentrepreneurial uprocess?
The uentrepreneurial uprocess ucomprises: udeveloping uopportunities, ugathering uresources, uand
umanaging uand ubuilding uoperations uwith uthe ugoal uof ucreating uvalue.
2. What uis uentrepreneurship? uWhat uare usome ubasic ucharacteristics uof uentrepreneurs?
Entrepreneurship uis uthe uprocess uof uchanging uideas uinto ucommercial uopportunities uand ucreating
uvalue. u While uthere uis uno uprototypical uentrepreneur, umany uare ugood uat urecognizing ucommercial
uopportunities, utend uto ube uoptimistic, uand uenvision ua uplan ufor uthe ufuture.
3. Why udo ubusinesses uclose uor ucease uoperating? uWhat uare uthe uprimary ureasons uwhy ubusinessesufail?
by J. Chris Leach, Ronald W. Melicher, Chapters 1 - 16,
Complete With CAPSTONE CASES
,TABLE OF CONTENTS
u u u
Part u1: uTHE uENTREPRENEURIAL uENVIRONMENT.
1. uIntroduction uto u
Finance ufor uEntrepreneurs.
2. uDeveloping uthe uBusiness uIdea.
Part u2: uORGANIZING uAND uOPERATING uTHE uVENTURE.
3. uOrganizing uand uFinancing ua uNew uVenture.
4. uPreparing uand uUsing uFinancial uStatements.
5. uEvaluating uOperating uand uFinancial uPerformance.
Part u3: uPLANNING uFOR uTHE uFUTURE.
6. uManaging uCash uFlow.
7. uTypes uand uCosts uof uFinancial uCapital.
8. uSecurities uLaw uConsiderations uWhen uObtaining uVenture uFinancing.
Part u4: uCREATING uAND uRECOGNIZING uVENTURE uVALUE.
9. uProjecting uFinancial uStatements.
10. uValuing uEarly-Stage uVentures.
11. uVenture uCapital uValuation uMethods.
Part u5: uSTRUCTURING uFINANCING uFOR uTHE uGROWING uVENTURE.
12. uProfessional uVenture uCapital.
13. uOther uFinancing uAlternatives.
14. uSecurity uStructures uand uDetermining uEnterprise uValues.
Part u6: uEXIT uAND uTURNAROUND uSTRATEGIES.
15. uHarvesting uthe uBusiness uVenture uInvestment.
16. uFinancially uTroubled uVentures: uTurnaround uOpportunities?
Part u7: uCAPSTONE uCASES.
Case u1. uEco-Products, uInc.
Case u2. uSpatial uTechnology, u
,Chapter u1
INTRODUCTION uTO uFINANCE uFOR uENTREPRENEURS
FOCUS
The upurpose uof uthis ufirst uchapter uis uto upresent uan uoverview uof uwhat uentrepreneurial ufinance uis
uabout. uIn udoing uso uwe uhope uto uconvey uto uyou uthe uimportance uof uunderstanding uand uapplying
uentrepreneurial ufinance umethods uand utools uto uhelp uensure uan uentrepreneurial uventure uis usuccessful.
uWe upresent ua ulife ucycle uapproach uto uthe uteaching uof uentrepreneurial ufinance uwhere uwe ucover
uventure uoperating uand ufinancial udecisions ufaced uby uthe uentrepreneur uas ua uventure uprogresses ufrom
uan uidea uthrough uto uharvesting uthe uventure.
LEARNING uOBJECTIVES
LO u1.1: uCharacterize uthe uentrepreneurial uprocess.
LO u1.2: uDescribe uentrepreneurship uand usome ucharacteristics uof uentrepreneurs.
LO u1.3: uIndicate useveral umegatrends uproviding uwaves uof uentrepreneurial uopportunities.
uLO u1.4: uList uand udescribe uthe useven uprinciples uof uentrepreneurial ufinance.
LO u1.5: uDiscuss uentrepreneurial ufinance uand uthe urole uof uthe ufinancial umanager.
uLO u1.6: uDescribe uthe uvarious ustages uof ua usuccessful uventure‘s ulife ucycle.
LO u1.7: uIdentify, uby ulife ucycle ustage, uthe urelevant utypes uof ufinancing uand uinvestors.
uLO u1.8: uUnderstand uthe ulife ucycle uapproach uused uin uthis ubook.
CHAPTER uOUTLINE
1.1 THE uENTREPRENEURIAL uPROCESS
1.2 ENTREPRENEURSHIP uFUNDAMENTALS
A. Who uis uan uEntrepreneur?
B. Basic uDefinitions
C. Entrepreneurial uTraits uor uCharacteristics
D. Opportunities uExist uBut uNot uWithout uRisks
1.3 SOURCES uOF uENTREPRENEURIAL uOPPORTUNITIES
A. Societal uChanges
B. Demographic uChanges
C. Technological uChanges
D. Emerging uEconomies uand uGlobal uChanges
E. Crises uand u―Bubbles‖
F. Disruptive uInnovation
1
, 1.4 PRINCIPLES uOF uENTREPRENEURIAL uFINANCE
A. Real, uHuman, uand uFinancial uCapital umust ube uRented ufrom uOwners u(Principle u#1)
B. Risk uand uExpected uReward ugo uHand uin uHand u(Principle u#2)
C. While uAccounting uis uthe uLanguage uof uBusiness, uCash uis uthe uCurrency u(Principle u#3)
D. New uVenture uFinancing uInvolves uSearch, uNegotiation, uand uPrivacy u(Principle u#4)
E. A uVenture‘s uFinancial uObjective uis uto uIncrease uValue u(Principle u#5)
F. It uis uDangerous uto uAssume uthat uPeople uAct uAgainst uTheir uOwn uSelf-Interests
u(Principle u#6)
G. Venture uCharacter uand uReputation ucan ube uAssets uor uLiabilities u(Principle u#7)
1.5 ROLE uOF uENTREPRENEURIAL uFINANCE
1.6 THE uSUCCESSFUL uVENTURE uLIFE uCYCLE
A. Development uStage
B. Startup uStage
C. Survival uStage
D. Rapid-Growth uStage
E. Early-Maturity uStage
F. Life uCycle uStages uand uthe uEntrepreneurial uProcess
1.7 FINANCING uTHROUGH uTHE uVENTURE uLIFE uCYCLE
A. Seed uFinancing
B. Startup uFinancing
C. First-Round uFinancing
D. Second-Round uFinancing
E. Mezzanine uFinancing
F. Liquidity-Stage uFinancing
G. Seasoned uFinancing
1.8 LIFE uCYCLE uAPPROACH uFOR uTEACHING uENTREPRENEURIAL uFINANCE
uSUMMARY
DISCUSSION uQUESTIONS uAND uANSWERS
1. What uis uthe uentrepreneurial uprocess?
The uentrepreneurial uprocess ucomprises: udeveloping uopportunities, ugathering uresources, uand
umanaging uand ubuilding uoperations uwith uthe ugoal uof ucreating uvalue.
2. What uis uentrepreneurship? uWhat uare usome ubasic ucharacteristics uof uentrepreneurs?
Entrepreneurship uis uthe uprocess uof uchanging uideas uinto ucommercial uopportunities uand ucreating
uvalue. u While uthere uis uno uprototypical uentrepreneur, umany uare ugood uat urecognizing ucommercial
uopportunities, utend uto ube uoptimistic, uand uenvision ua uplan ufor uthe ufuture.
3. Why udo ubusinesses uclose uor ucease uoperating? uWhat uare uthe uprimary ureasons uwhy ubusinessesufail?
