Entrepreneurial Finance, 7th Edition

SOLUTION MANUAL
Entrepreneurial Finance, 7th Edition
J. Chris Leach, Ronald W. Melicher
Chapters 1 - 16 With CAPSTONE CASES

,TABLE OF CONTENTS u u u




Part 1: THE ENTREPRENEURIAL ENVIRONMENT.
u u u u



1. Introduction to Finance for Entrepreneurs. u u u u



2. Developing the Business Idea. u u u



Part 2: ORGANIZING AND OPERATING THE VENTURE.
u u u u u u



3. Organizing and Financing a New Venture. u u u u u



4. Preparing and Using Financial Statements.
u u u u



5. Evaluating Operating and Financial Performance.
u u u u



u Part 3: PLANNING FOR THE FUTURE.
u u u u u



6. Managing Cash Flow. u u



7. Types and Costs of Financial Capital.
u u u u u



8. Securities Law Considerations When Obtaining Venture Financing.
u u u u u u u Part
4: CREATING AND RECOGNIZING VENTURE VALUE.
u u u u u u



9. Projecting Financial Statements. u u



10. Valuing Early-Stage Ventures. u u



11. Venture Capital Valuation Methods. u u u



Part 5: STRUCTURING FINANCING FOR THE GROWING VENTURE.
u u u u u u u



12. Professional Venture Capital. u u



13. Other Financing Alternatives.
u u



14. Security Structures and Determining Enterprise Values.
u u u u u u Part
6: EXIT AND TURNAROUND STRATEGIES.
u u u u u



15. Harvesting the Business Venture Investment. u u u u



16. Financially Troubled Ventures: Turnaround Opportunities? Part
u u u u u



7: CAPSTONE CASES.
u u u



Case 1. Eco-Products, Inc. Case
u u u u



2. Spatial Technology,
u u u

,Chapter 1 u




INTRODUCTION uTO uFINANCE uFOR uENTREPRENEURS u FOCUS

The upurpose uof uthis ufirst uchapter uis uto upresent uan uoverview uof uwhat uentrepreneurial ufinance uis
u about. uIn udoing uso uwe uhope uto uconvey uto uyou uthe uimportance uof uunderstanding uand uapplying

u entrepreneurial ufinance umethods uand utools uto uhelp uensure uan uentrepreneurial uventure uis

u successful.We upresent ua ulife ucycle uapproach uto uthe uteaching uof uentrepreneurial ufinance uwhere

u we ucover uventure uoperating uand ufinancial udecisions ufaced uby uthe uentrepreneur uas ua uventure

u progresses 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.
u LO u1.3: uIndicate useveral umegatrends uproviding uwaves uof uentrepreneurial

u opportunities.LO u1.4: uList uand udescribe uthe useven uprinciples uof uentrepreneurial

u finance.

LO u1.5: uDiscuss uentrepreneurial ufinance uand uthe urole uof uthe ufinancial
u manager.LO u1.6: uDescribe uthe uvarious ustages uof ua usuccessful uventure‘s ulife

u cycle.

LO u1.7: uIdentify, uby ulife ucycle ustage, uthe urelevant utypes uof ufinancing uand
u investors.LO 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-
u Interests(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
u SUMMARY




DISCUSSION uQUESTIONS uAND uANSWERS

1. What uis uthe uentrepreneurial uprocess?

The uentrepreneurial uprocess ucomprises: udeveloping uopportunities, ugathering uresources,
u andmanaging 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
u creatingvalue. u uWhile uthere uis uno uprototypical u entrepreneur, umany uare ugood uat

urecognizing u commercial 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
ubusinesses u fail?