SOLUTIONMANUAL j
EntrepreneurialFinance,7thEdition
j j j
J. Chris Leach, Ronald W. Melicher
j j j j j
Chapters 1 -16 WithCAPSTONE CASES
j j j j j j
,TABLE OF CONTENTS
j j j
Part j1: jTHE jENTREPRENEURIAL jENVIRONMENT.
1. Introduction jto jFinance jfor jEntrepreneurs.
2. Developing jthe jBusiness jIdea.
Part j2: jORGANIZING jAND jOPERATING jTHE jVENTURE.
3. Organizing jand jFinancing ja jNew jVenture.
4. Preparing jand jUsing jFinancial jStatements.
5. Evaluating jOperating jand jFinancial jPerformance. j Part
3: jPLANNING jFOR jTHE jFUTURE.
j
6. Managing jCash jFlow.
7. Types jand jCosts jof jFinancial jCapital.
8. Securities jLaw jConsiderations jWhen jObtaining jVenture jFinancing. j Part j4:
CREATING jAND jRECOGNIZING jVENTURE jVALUE.
j
9. Projecting jFinancial jStatements.
10. Valuing jEarly-Stage jVentures.
11. Venture jCapital jValuation jMethods.
Part j5: jSTRUCTURING jFINANCING jFOR jTHE jGROWING jVENTURE.
12. Professional jVenture jCapital.
13. Other jFinancing jAlternatives.
14. Security jStructures jand jDetermining jEnterprise jValues. j Part j6:
EXIT jAND jTURNAROUND jSTRATEGIES.
j
15. Harvesting jthe jBusiness jVenture jInvestment.
16. Financially jTroubled jVentures: jTurnaround jOpportunities? j Part j7:
CAPSTONE jCASES.
j
Case j1. jEco-Products, jInc. j Case
2. jSpatial jTechnology,
j
,Chapter 1 j
INTRODUCTION jTO jFINANCE jFOR jENTREPRENEURS j FOCUS
The jpurpose jof jthis jfirst jchapter jis jto jpresent jan joverview jof jwhat jentrepreneurial jfinance jis
j about. jIn jdoing jso jwe jhope jto jconvey jto jyou jthe jimportance jof junderstanding jand japplying
j entrepreneurial jfinance jmethods jand jtools jto jhelp jensure jan jentrepreneurial jventure jis
j successful.We jpresent ja jlife jcycle japproach jto jthe jteaching jof jentrepreneurial jfinance jwhere j we
jcover jventure joperating jand jfinancial jdecisions jfaced jby jthe jentrepreneur jas ja jventure
j progresses jfrom jan jidea jthrough jto jharvesting jthe jventure.
LEARNING jOBJECTIVES
LO j1.1: jCharacterize jthe jentrepreneurial jprocess.
LO j1.2: jDescribe jentrepreneurship jand jsome jcharacteristics jof jentrepreneurs. j LO
j1.3: jIndicate jseveral jmegatrends jproviding jwaves jof jentrepreneurial
j opportunities.LO j1.4: jList jand jdescribe jthe jseven jprinciples jof jentrepreneurial
j finance.
LO j1.5: jDiscuss jentrepreneurial jfinance jand jthe jrole jof jthe jfinancial j manager.LO
j1.6: jDescribe jthe jvarious jstages jof ja jsuccessful jventure‘s jlife j cycle.
LO j1.7: jIdentify, jby jlife jcycle jstage, jthe jrelevant jtypes jof jfinancing jand
j investors.LO j1.8: jUnderstand jthe jlife jcycle japproach jused jin jthis jbook.
CHAPTER jOUTLINE
1.1 THE jENTREPRENEURIAL jPROCESS
1.2 ENTREPRENEURSHIP jFUNDAMENTALS
A. Who jis jan jEntrepreneur?
B. Basic jDefinitions
C. Entrepreneurial jTraits jor jCharacteristics
D. Opportunities jExist jBut jNot jWithout jRisks
1.3 SOURCES jOF jENTREPRENEURIAL jOPPORTUNITIES
A. Societal jChanges
B. Demographic jChanges
C. Technological jChanges
D. Emerging jEconomies jand jGlobal jChanges
E. Crises jand j ―Bubbles‖
F. Disruptive jInnovation
1
, 1.4 PRINCIPLES jOF jENTREPRENEURIAL jFINANCE
A. Real, jHuman, jand jFinancial jCapital jmust jbe jRented jfrom jOwners j(Principle j#1)
B. Risk jand jExpected jReward jgo jHand jin jHand j(Principle j#2)
C. While jAccounting jis jthe jLanguage jof jBusiness, jCash jis jthe jCurrency j(Principle j#3)
D. New jVenture jFinancing jInvolves jSearch, jNegotiation, jand jPrivacy j(Principle j#4)
E. A jVenture‘s jFinancial jObjective jis jto jIncrease jValue j(Principle j#5)
F. It jis jDangerous jto jAssume jthat jPeople jAct jAgainst jTheir jOwn jSelf-
j Interests(Principle j#6)
G. Venture jCharacter jand jReputation jcan jbe jAssets jor jLiabilities j(Principle j#7)
1.5 ROLE jOF jENTREPRENEURIAL jFINANCE
1.6 THE jSUCCESSFUL jVENTURE jLIFE jCYCLE
A. Development jStage
B. Startup jStage
C. Survival jStage
D. Rapid-Growth jStage
E. Early-Maturity jStage
F. Life jCycle jStages jand jthe jEntrepreneurial jProcess
1.7 FINANCING jTHROUGH jTHE jVENTURE jLIFE jCYCLE
A. Seed jFinancing
B. Startup jFinancing
C. First-Round jFinancing
D. Second-Round jFinancing
E. Mezzanine jFinancing
F. Liquidity-Stage jFinancing
G. Seasoned jFinancing
1.8 LIFE jCYCLE jAPPROACH jFOR jTEACHING jENTREPRENEURIAL jFINANCE
j SUMMARY
DISCUSSION jQUESTIONS jAND jANSWERS
1. What jis jthe jentrepreneurial jprocess?
The jentrepreneurial jprocess jcomprises: jdeveloping jopportunities, jgathering jresources,
j andmanaging jand jbuilding joperations jwith jthe jgoal jof jcreating jvalue.
2. What jis jentrepreneurship? jWhat jare jsome jbasic jcharacteristics jof jentrepreneurs?
Entrepreneurship jis jthe jprocess jof jchanging jideas jinto jcommercial jopportunities jand
j creatingvalue. j jWhile jthere jis jno jprototypical j entrepreneur, jmany jare jgood jat jrecognizing
j commercial jopportunities, jtend jto jbe joptimistic, jand jenvision ja jplan jfor jthe jfuture.
3. Why jdo jbusinesses jclose jor jcease joperating? jWhat jare jthe jprimary jreasons jwhy jbusinesses
j fail?
EntrepreneurialFinance,7thEdition
j j j
J. Chris Leach, Ronald W. Melicher
j j j j j
Chapters 1 -16 WithCAPSTONE CASES
j j j j j j
,TABLE OF CONTENTS
j j j
Part j1: jTHE jENTREPRENEURIAL jENVIRONMENT.
1. Introduction jto jFinance jfor jEntrepreneurs.
2. Developing jthe jBusiness jIdea.
Part j2: jORGANIZING jAND jOPERATING jTHE jVENTURE.
3. Organizing jand jFinancing ja jNew jVenture.
4. Preparing jand jUsing jFinancial jStatements.
5. Evaluating jOperating jand jFinancial jPerformance. j Part
3: jPLANNING jFOR jTHE jFUTURE.
j
6. Managing jCash jFlow.
7. Types jand jCosts jof jFinancial jCapital.
8. Securities jLaw jConsiderations jWhen jObtaining jVenture jFinancing. j Part j4:
CREATING jAND jRECOGNIZING jVENTURE jVALUE.
j
9. Projecting jFinancial jStatements.
10. Valuing jEarly-Stage jVentures.
11. Venture jCapital jValuation jMethods.
Part j5: jSTRUCTURING jFINANCING jFOR jTHE jGROWING jVENTURE.
12. Professional jVenture jCapital.
13. Other jFinancing jAlternatives.
14. Security jStructures jand jDetermining jEnterprise jValues. j Part j6:
EXIT jAND jTURNAROUND jSTRATEGIES.
j
15. Harvesting jthe jBusiness jVenture jInvestment.
16. Financially jTroubled jVentures: jTurnaround jOpportunities? j Part j7:
CAPSTONE jCASES.
j
Case j1. jEco-Products, jInc. j Case
2. jSpatial jTechnology,
j
,Chapter 1 j
INTRODUCTION jTO jFINANCE jFOR jENTREPRENEURS j FOCUS
The jpurpose jof jthis jfirst jchapter jis jto jpresent jan joverview jof jwhat jentrepreneurial jfinance jis
j about. jIn jdoing jso jwe jhope jto jconvey jto jyou jthe jimportance jof junderstanding jand japplying
j entrepreneurial jfinance jmethods jand jtools jto jhelp jensure jan jentrepreneurial jventure jis
j successful.We jpresent ja jlife jcycle japproach jto jthe jteaching jof jentrepreneurial jfinance jwhere j we
jcover jventure joperating jand jfinancial jdecisions jfaced jby jthe jentrepreneur jas ja jventure
j progresses jfrom jan jidea jthrough jto jharvesting jthe jventure.
LEARNING jOBJECTIVES
LO j1.1: jCharacterize jthe jentrepreneurial jprocess.
LO j1.2: jDescribe jentrepreneurship jand jsome jcharacteristics jof jentrepreneurs. j LO
j1.3: jIndicate jseveral jmegatrends jproviding jwaves jof jentrepreneurial
j opportunities.LO j1.4: jList jand jdescribe jthe jseven jprinciples jof jentrepreneurial
j finance.
LO j1.5: jDiscuss jentrepreneurial jfinance jand jthe jrole jof jthe jfinancial j manager.LO
j1.6: jDescribe jthe jvarious jstages jof ja jsuccessful jventure‘s jlife j cycle.
LO j1.7: jIdentify, jby jlife jcycle jstage, jthe jrelevant jtypes jof jfinancing jand
j investors.LO j1.8: jUnderstand jthe jlife jcycle japproach jused jin jthis jbook.
CHAPTER jOUTLINE
1.1 THE jENTREPRENEURIAL jPROCESS
1.2 ENTREPRENEURSHIP jFUNDAMENTALS
A. Who jis jan jEntrepreneur?
B. Basic jDefinitions
C. Entrepreneurial jTraits jor jCharacteristics
D. Opportunities jExist jBut jNot jWithout jRisks
1.3 SOURCES jOF jENTREPRENEURIAL jOPPORTUNITIES
A. Societal jChanges
B. Demographic jChanges
C. Technological jChanges
D. Emerging jEconomies jand jGlobal jChanges
E. Crises jand j ―Bubbles‖
F. Disruptive jInnovation
1
, 1.4 PRINCIPLES jOF jENTREPRENEURIAL jFINANCE
A. Real, jHuman, jand jFinancial jCapital jmust jbe jRented jfrom jOwners j(Principle j#1)
B. Risk jand jExpected jReward jgo jHand jin jHand j(Principle j#2)
C. While jAccounting jis jthe jLanguage jof jBusiness, jCash jis jthe jCurrency j(Principle j#3)
D. New jVenture jFinancing jInvolves jSearch, jNegotiation, jand jPrivacy j(Principle j#4)
E. A jVenture‘s jFinancial jObjective jis jto jIncrease jValue j(Principle j#5)
F. It jis jDangerous jto jAssume jthat jPeople jAct jAgainst jTheir jOwn jSelf-
j Interests(Principle j#6)
G. Venture jCharacter jand jReputation jcan jbe jAssets jor jLiabilities j(Principle j#7)
1.5 ROLE jOF jENTREPRENEURIAL jFINANCE
1.6 THE jSUCCESSFUL jVENTURE jLIFE jCYCLE
A. Development jStage
B. Startup jStage
C. Survival jStage
D. Rapid-Growth jStage
E. Early-Maturity jStage
F. Life jCycle jStages jand jthe jEntrepreneurial jProcess
1.7 FINANCING jTHROUGH jTHE jVENTURE jLIFE jCYCLE
A. Seed jFinancing
B. Startup jFinancing
C. First-Round jFinancing
D. Second-Round jFinancing
E. Mezzanine jFinancing
F. Liquidity-Stage jFinancing
G. Seasoned jFinancing
1.8 LIFE jCYCLE jAPPROACH jFOR jTEACHING jENTREPRENEURIAL jFINANCE
j SUMMARY
DISCUSSION jQUESTIONS jAND jANSWERS
1. What jis jthe jentrepreneurial jprocess?
The jentrepreneurial jprocess jcomprises: jdeveloping jopportunities, jgathering jresources,
j andmanaging jand jbuilding joperations jwith jthe jgoal jof jcreating jvalue.
2. What jis jentrepreneurship? jWhat jare jsome jbasic jcharacteristics jof jentrepreneurs?
Entrepreneurship jis jthe jprocess jof jchanging jideas jinto jcommercial jopportunities jand
j creatingvalue. j jWhile jthere jis jno jprototypical j entrepreneur, jmany jare jgood jat jrecognizing
j commercial jopportunities, jtend jto jbe joptimistic, jand jenvision ja jplan jfor jthe jfuture.
3. Why jdo jbusinesses jclose jor jcease joperating? jWhat jare jthe jprimary jreasons jwhy jbusinesses
j fail?
