Solution manual for entrepreneurial finance 7th edition J. Chris Leach, Ronald W. Melicher

SOLUTIONMANUAL l




EntrepreneurialFinance,7thEdition l l l




J.ChrisLeach,RonaldW.Melicher
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Chapters1-16WithCAPSTONECASES
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,TABLE OF CONTENTS ll ll ll




Part 1:THEENTREPRENEURIAL ENVIRONMENT.
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1. Introduction to Finance for Entrepreneurs. l l l l




2. Developing the Business Idea. l l l




Part 2: ORGANIZING AND OPERATING THE VENTURE.
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3. Organizing and Financing a New Venture. ll l ll ll l




4. PreparingandUsing Financial Statements. l l l l




5. EvaluatingOperatingandFinancial Performance. Part l l l l l l




3: PLANNING FOR THE FUTURE.
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6. Managing CashFlow. l l




7. Types and Costs of Financial Capital.
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8. SecuritiesLaw ConsiderationsWhenObtainingVenture Financing. Part 4:
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CREATING AND RECOGNIZING VENTURE VALUE.
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9. ProjectingFinancialStatements. l l




10. ValuingEarly-StageVentures. l l




11. Venture CapitalValuationMethods. l l l




Part 5: STRUCTURING FINANCING FOR THE GROWING VENTURE.
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12. ProfessionalVentureCapital. l l




13. OtherFinancingAlternatives. l l




14. SecurityStructuresandDeterminingEnterprise Values. Part 6:
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EXIT AND TURNAROUND STRATEGIES.
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15. Harvestingthe BusinessVentureInvestment. l l l l




16. FinanciallyTroubledVentures:TurnaroundOpportunities? Part 7: l l l l l l ll




CAPSTONE CASES.
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Case 1. Eco-Products, Inc. Case 2.
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Spatial Technology,
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,Chapter 1 ll




INTRODUCTION TO FINANCE FOR ENTREPRENEURS FOCUS l ll l l l l




The purpose of this first chapter is to present an overview of what entrepreneurial finance is about. In
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doing so we hope to convey to you the importance of understanding and applying entrepreneurial
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finance methods and tools to help ensure an entrepreneurial venture is successful.We present a life
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cycle approach to the teaching of entrepreneurial finance where we cover venture operating and
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financial decisions faced by the entrepreneur as a venture progresses from an idea through to
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harvesting the venture.
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LEARNINGOBJECTIVES l




LO 1.1: Characterize the entrepreneurial process.
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LO 1.2: Describe entrepreneurship and some characteristics of entrepreneurs. LO
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1.3: Indicate several megatrends providing waves of entrepreneurial
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opportunities.LO 1.4: List and describe the sevenprinciples of entrepreneurial
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l finance.
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LO 1.5: Discuss entrepreneurial finance and the role of the financial manager.LO
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1.6: Describe the various stages of a successful venture‘s life cycle.
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LO 1.7: Identify, by life cycle stage, the relevant types of financing and
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investors.LO 1.8: Understand the life cycle approach used in this book.
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CHAPTEROUTLINE l




1.1 THE ENTREPRENEURIALPROCESS ll l



1.2 ENTREPRENEURSHIPFUNDAMENTALS l



A. Who is an Entrepreneur? ll ll ll



B. Basic Definitions l



C. Entrepreneurial Traits or Characteristics l l ll



D. Opportunities Exist But Not Without Risks ll ll l ll l



1.3 SOURCES OF ENTREPRENEURIALOPPORTUNITIES l l l



A. Societal Changes l



B. DemographicChanges l



C. Technological Changes l



D. EmergingEconomies and Global Changes l ll ll ll



E. Crises and ―Bubbles‖ ll ll



F. DisruptiveInnovation l




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, 1.4 PRINCIPLES OFENTREPRENEURIAL FINANCE l l l



A. Real, Human, and Financial Capital must be Rented from Owners (Principle #1)
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B. Risk and Expected Reward go Hand in Hand (Principle #2)
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C. While Accounting is the Language of Business, Cash is the Currency (Principle #3)
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D. New Venture Financing Involves Search, Negotiation, and Privacy (Principle #4)
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E. A Venture‘s Financial Objective is to Increase Value (Principle #5)
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F. It is Dangerous to Assume that People Act Against Their Own Self-
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Interests(Principle#6) l l l



G. Venture Character and Reputation can be Assets or Liabilities (Principle #7) l ll ll l ll ll ll ll l l



1.5 ROLE OF ENTREPRENEURIAL FINANCE
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1.6 THE SUCCESSFULVENTURE LIFE CYCLE
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A. DevelopmentStage l



B. Startup Stage l



C. SurvivalStage l



D. Rapid-GrowthStage l



E. Early-MaturityStage l



F. Life Cycle Stages and the Entrepreneurial Process
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1.7 FINANCING THROUGH THE VENTURE LIFE CYCLE l l ll ll ll



A. Seed Financing l



B. Startup Financing l



C. First-RoundFinancing l



D. Second-RoundFinancing l



E. Mezzanine Financing l



F. Liquidity-StageFinancing l



G. Seasoned Financing l



1.8 LIFE CYCLE APPROACH FOR TEACHING ENTREPRENEURIAL FINANCE
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SUMMARY
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DISCUSSION QUESTIONS AND ANSWERS l l ll




1. What is the entrepreneurial process?
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Theentrepreneurial process comprises: developing opportunities, gathering resources,
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landmanaging and building operations with the goal of creating value.
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2. What is entrepreneurship? What are some basic characteristics of entrepreneurs?
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Entrepreneurship is the process of changing ideas into commercial opportunities and ll ll l ll ll ll l ll ll ll



l creatingvalue. While there is no prototypical entrepreneur, many are good at recognizing
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l commercial opportunities, tend to be optimistic, and envision a plan for the future.
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3. Why do businesses close or cease operating? What are the primary reasons why businesses
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