SOLUTION MANUAL For Entrepreneurial Finance, 7th Edition
by J. Chris Leach, Ronald W. Melicher, Chapters 1 - 16,
Complete With CAPSTONE CASES
,TABLE OF CONTENTS njnj njnj njnj
Part 1: THE ENTREPRENEURIAL ENVIRONMENT.
njnj njnj njnj njnj
1. Introduction to
njnj njnj njnj
Finance for Entrepreneurs.
njnj njnj
2. Developing the Business Idea.
njnj njnj njnj njnj
Part 2: ORGANIZING AND OPERATING THE VENTURE.
njnj njnj njnj njnj njnj njnj
3. Organizing and Financing a New Venture.
njnj njnj njnj njnj njnj njnj
4. Preparing and Using Financial Statements.
njnj njnj njnj njnj njnj
5. Evaluating Operating and Financial Performance.
njnj njnj njnj njnj njnj
Part 3: PLANNING FOR THE FUTURE.
njnj njnj njnj njnj njnj
6. Managing Cash Flow.
njnj njnj njnj
7. Types and Costs of Financial Capital.
njnj njnj njnj njnj njnj njnj
8. Securities Law Considerations When Obtaining Venture Financing.
njnj njnj njnj njnj njnj njnj njnj
Part 4: CREATING AND RECOGNIZING VENTURE VALUE.
njnj njnj njnj njnj njnj njnj
9. Projecting Financial Statements.
njnj njnj njnj
10. Valuing Early-Stage Ventures.
njnj njnj njnj
11. Venture Capital Valuation Methods.
njnj njnj njnj njnj
Part 5: STRUCTURING FINANCING FOR THE GROWING VENTURE.
njnj njnj njnj njnj njnj njnj njnj
12. Professional Venture Capital.
njnj njnj njnj
13. Other Financing Alternatives.
njnj njnj njnj
14. Security Structures and Determining Enterprise Values.
njnj njnj njnj njnj njnj njnj
Part 6: EXIT AND TURNAROUND STRATEGIES.
njnj njnj njnj njnj njnj
15. Harvesting the Business Venture Investment.
njnj njnj njnj njnj njnj
16. Financially Troubled Ventures: Turnaround Opportunities?
njnj njnj njnj njnj njnj
Part 7: CAPSTONE CASES.
njnj njnj njnj
Case 1. Eco-Products, Inc.
njnj njnj njnj
Case 2. Spatial Technology,
njnj njnj njnj njnj
,Chapter 1 njnj
INTRODUCTION TO FINANCE FOR ENTREPRENEURS njnj njnj njnj njnj
FOCUS
The purpose of this first chapter is to present an overview of what entrepreneurial finance is
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
about. In doing so we hope to convey to you the importance of understanding and applying
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
entrepreneurial finance methods and tools to help ensure an entrepreneurial venture is
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
successful.We present a life cycle approach to the teaching of entrepreneurial finance where we
njnj nj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
cover venture operating and financial decisions faced by the entrepreneur as a venture
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
progresses from an idea through to harvesting the venture.
njnj njnj njnj njnj njnj njnj njnj njnj njnj
LEARNING OBJECTIVES njnj
LO 1.1: Characterize the entrepreneurial process.
njnj njnj njnj njnj njnj
LO 1.2: Describe entrepreneurship and some characteristics of entrepreneurs.
njnj njnj njnj njnj njnj njnj njnj njnj
LO 1.3: Indicate several megatrends providing waves of entrepreneurial
njnj njnj njnj njnj njnj njnj njnj njnj
opportunities.LO 1.4: List and describe the seven principles of entrepreneurial
njnj nj njnj njnj njnj njnj njnj njnj njnj njnj njnj
finance.
njnj
LO 1.5: Discuss entrepreneurial finance and the role of the financial
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
manager.LO 1.6: Describe the various stages of a successful venture‘s life
njnj nj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
cycle.
njnj
LO 1.7: Identify, by life cycle stage, the relevant types of financing and
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
investors.LO 1.8: Understand the life cycle approach used in this book.
njnj nj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
CHAPTER OUTLINE njnj
1.1 THE ENTREPRENEURIAL PROCESS njnj njnj
1.2 ENTREPRENEURSHIP FUNDAMENTALS njnj
A. Who is an Entrepreneur? njnj njnj njnj
B. Basic Definitions njnj
C. Entrepreneurial Traits or Characteristics njnj njnj njnj
D. Opportunities Exist But Not Without Risks njnj njnj njnj njnj njnj
1.3 SOURCES OF ENTREPRENEURIAL OPPORTUNITIES njnj njnj njnj
A. Societal Changes njnj
B. Demographic Changes njnj
C. Technological Changes njnj
D. Emerging Economies and Global Changes njnj njnj njnj njnj
E. Crises and ―Bubbles‖ njnj njnj
F. Disruptive Innovation njnj
1
, 1.4 PRINCIPLES OF ENTREPRENEURIAL FINANCE njnj njnj njnj
A. Real, Human, and Financial Capital must be Rented from Owners (Principle #1)
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
B. Risk and Expected Reward go Hand in Hand (Principle #2)
njnj njnj njnj njnj njnj njnj njnj njnj njnj
C. While Accounting is the Language of Business, Cash is the Currency (Principle #3)
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
D. New Venture Financing Involves Search, Negotiation, and Privacy (Principle #4)
njnj njnj njnj njnj njnj njnj njnj njnj njnj
E. A Venture‘s Financial Objective is to Increase Value (Principle #5)
njnj njnj njnj njnj njnj njnj njnj njnj njnj
F. It is Dangerous to Assume that People Act Against Their Own Self-
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
Interests(Principle #6) nj njnj
G. Venture Character and Reputation can be Assets or Liabilities (Principle #7)
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
1.5 ROLE OF ENTREPRENEURIAL FINANCE
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1.6 THE SUCCESSFUL VENTURE LIFE CYCLE
njnj njnj njnj njnj
A. Development Stage njnj
B. Startup Stage njnj
C. Survival Stage njnj
D. Rapid-Growth Stage njnj
E. Early-Maturity Stage njnj
F. Life Cycle Stages and the Entrepreneurial Process
njnj njnj njnj njnj njnj njnj
1.7 FINANCING THROUGH THE VENTURE LIFE CYCLE njnj njnj njnj njnj njnj
A. Seed Financing njnj
B. Startup Financing njnj
C. First-Round Financing njnj
D. Second-Round Financing njnj
E. Mezzanine Financing njnj
F. Liquidity-Stage Financing njnj
G. Seasoned Financing njnj
1.8 LIFE CYCLE APPROACH FOR TEACHING ENTREPRENEURIAL
njnj njnj njnj njnj njnj
FINANCESUMMARY
njnj nj
DISCUSSION QUESTIONS AND ANSWERS njnj njnj njnj
1. What is the entrepreneurial process?
njnj njnj njnj njnj
The entrepreneurial process comprises: developing opportunities, gathering resources,
njnj njnj njnj njnj njnj njnj njnj
andmanaging and building operations with the goal of creating value.
njnj nj njnj njnj njnj njnj njnj njnj njnj njnj njnj
2. What is entrepreneurship? What are some basic characteristics of entrepreneurs?
njnj njnj njnj njnj njnj njnj njnj njnj njnj
Entrepreneurship is the process of changing ideas into commercial opportunities and
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
creatingvalue.
njnj While there is no prototypical entrepreneur, many are good at
nj n j n j njnj njnj njnj njnj njnj njnj njnj njnj njnj
recognizing commercial opportunities, tend to be optimistic, and envision a plan for the
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
future.
njnj
3. Why do businesses close or cease operating? What are the primary reasons why businessesfail?
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj nj
by J. Chris Leach, Ronald W. Melicher, Chapters 1 - 16,
Complete With CAPSTONE CASES
,TABLE OF CONTENTS njnj njnj njnj
Part 1: THE ENTREPRENEURIAL ENVIRONMENT.
njnj njnj njnj njnj
1. Introduction to
njnj njnj njnj
Finance for Entrepreneurs.
njnj njnj
2. Developing the Business Idea.
njnj njnj njnj njnj
Part 2: ORGANIZING AND OPERATING THE VENTURE.
njnj njnj njnj njnj njnj njnj
3. Organizing and Financing a New Venture.
njnj njnj njnj njnj njnj njnj
4. Preparing and Using Financial Statements.
njnj njnj njnj njnj njnj
5. Evaluating Operating and Financial Performance.
njnj njnj njnj njnj njnj
Part 3: PLANNING FOR THE FUTURE.
njnj njnj njnj njnj njnj
6. Managing Cash Flow.
njnj njnj njnj
7. Types and Costs of Financial Capital.
njnj njnj njnj njnj njnj njnj
8. Securities Law Considerations When Obtaining Venture Financing.
njnj njnj njnj njnj njnj njnj njnj
Part 4: CREATING AND RECOGNIZING VENTURE VALUE.
njnj njnj njnj njnj njnj njnj
9. Projecting Financial Statements.
njnj njnj njnj
10. Valuing Early-Stage Ventures.
njnj njnj njnj
11. Venture Capital Valuation Methods.
njnj njnj njnj njnj
Part 5: STRUCTURING FINANCING FOR THE GROWING VENTURE.
njnj njnj njnj njnj njnj njnj njnj
12. Professional Venture Capital.
njnj njnj njnj
13. Other Financing Alternatives.
njnj njnj njnj
14. Security Structures and Determining Enterprise Values.
njnj njnj njnj njnj njnj njnj
Part 6: EXIT AND TURNAROUND STRATEGIES.
njnj njnj njnj njnj njnj
15. Harvesting the Business Venture Investment.
njnj njnj njnj njnj njnj
16. Financially Troubled Ventures: Turnaround Opportunities?
njnj njnj njnj njnj njnj
Part 7: CAPSTONE CASES.
njnj njnj njnj
Case 1. Eco-Products, Inc.
njnj njnj njnj
Case 2. Spatial Technology,
njnj njnj njnj njnj
,Chapter 1 njnj
INTRODUCTION TO FINANCE FOR ENTREPRENEURS njnj njnj njnj njnj
FOCUS
The purpose of this first chapter is to present an overview of what entrepreneurial finance is
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
about. In doing so we hope to convey to you the importance of understanding and applying
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
entrepreneurial finance methods and tools to help ensure an entrepreneurial venture is
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
successful.We present a life cycle approach to the teaching of entrepreneurial finance where we
njnj nj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
cover venture operating and financial decisions faced by the entrepreneur as a venture
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
progresses from an idea through to harvesting the venture.
njnj njnj njnj njnj njnj njnj njnj njnj njnj
LEARNING OBJECTIVES njnj
LO 1.1: Characterize the entrepreneurial process.
njnj njnj njnj njnj njnj
LO 1.2: Describe entrepreneurship and some characteristics of entrepreneurs.
njnj njnj njnj njnj njnj njnj njnj njnj
LO 1.3: Indicate several megatrends providing waves of entrepreneurial
njnj njnj njnj njnj njnj njnj njnj njnj
opportunities.LO 1.4: List and describe the seven principles of entrepreneurial
njnj nj njnj njnj njnj njnj njnj njnj njnj njnj njnj
finance.
njnj
LO 1.5: Discuss entrepreneurial finance and the role of the financial
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
manager.LO 1.6: Describe the various stages of a successful venture‘s life
njnj nj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
cycle.
njnj
LO 1.7: Identify, by life cycle stage, the relevant types of financing and
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
investors.LO 1.8: Understand the life cycle approach used in this book.
njnj nj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
CHAPTER OUTLINE njnj
1.1 THE ENTREPRENEURIAL PROCESS njnj njnj
1.2 ENTREPRENEURSHIP FUNDAMENTALS njnj
A. Who is an Entrepreneur? njnj njnj njnj
B. Basic Definitions njnj
C. Entrepreneurial Traits or Characteristics njnj njnj njnj
D. Opportunities Exist But Not Without Risks njnj njnj njnj njnj njnj
1.3 SOURCES OF ENTREPRENEURIAL OPPORTUNITIES njnj njnj njnj
A. Societal Changes njnj
B. Demographic Changes njnj
C. Technological Changes njnj
D. Emerging Economies and Global Changes njnj njnj njnj njnj
E. Crises and ―Bubbles‖ njnj njnj
F. Disruptive Innovation njnj
1
, 1.4 PRINCIPLES OF ENTREPRENEURIAL FINANCE njnj njnj njnj
A. Real, Human, and Financial Capital must be Rented from Owners (Principle #1)
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
B. Risk and Expected Reward go Hand in Hand (Principle #2)
njnj njnj njnj njnj njnj njnj njnj njnj njnj
C. While Accounting is the Language of Business, Cash is the Currency (Principle #3)
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
D. New Venture Financing Involves Search, Negotiation, and Privacy (Principle #4)
njnj njnj njnj njnj njnj njnj njnj njnj njnj
E. A Venture‘s Financial Objective is to Increase Value (Principle #5)
njnj njnj njnj njnj njnj njnj njnj njnj njnj
F. It is Dangerous to Assume that People Act Against Their Own Self-
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
Interests(Principle #6) nj njnj
G. Venture Character and Reputation can be Assets or Liabilities (Principle #7)
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
1.5 ROLE OF ENTREPRENEURIAL FINANCE
njnj njnj njnj
1.6 THE SUCCESSFUL VENTURE LIFE CYCLE
njnj njnj njnj njnj
A. Development Stage njnj
B. Startup Stage njnj
C. Survival Stage njnj
D. Rapid-Growth Stage njnj
E. Early-Maturity Stage njnj
F. Life Cycle Stages and the Entrepreneurial Process
njnj njnj njnj njnj njnj njnj
1.7 FINANCING THROUGH THE VENTURE LIFE CYCLE njnj njnj njnj njnj njnj
A. Seed Financing njnj
B. Startup Financing njnj
C. First-Round Financing njnj
D. Second-Round Financing njnj
E. Mezzanine Financing njnj
F. Liquidity-Stage Financing njnj
G. Seasoned Financing njnj
1.8 LIFE CYCLE APPROACH FOR TEACHING ENTREPRENEURIAL
njnj njnj njnj njnj njnj
FINANCESUMMARY
njnj nj
DISCUSSION QUESTIONS AND ANSWERS njnj njnj njnj
1. What is the entrepreneurial process?
njnj njnj njnj njnj
The entrepreneurial process comprises: developing opportunities, gathering resources,
njnj njnj njnj njnj njnj njnj njnj
andmanaging and building operations with the goal of creating value.
njnj nj njnj njnj njnj njnj njnj njnj njnj njnj njnj
2. What is entrepreneurship? What are some basic characteristics of entrepreneurs?
njnj njnj njnj njnj njnj njnj njnj njnj njnj
Entrepreneurship is the process of changing ideas into commercial opportunities and
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
creatingvalue.
njnj While there is no prototypical entrepreneur, many are good at
nj n j n j njnj njnj njnj njnj njnj njnj njnj njnj njnj
recognizing commercial opportunities, tend to be optimistic, and envision a plan for the
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj
future.
njnj
3. Why do businesses close or cease operating? What are the primary reasons why businessesfail?
njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj njnj nj
