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

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

,TABLE OF CONTENTS
62 62 62




Part621:62THE62ENTREPRENEURIAL62ENVIRONMENT.
1. Introduction62to62Finance62for62Entrepreneurs.
2. Developing62the62Business62Idea.
Part622:62ORGANIZING62AND62OPERATING62THE62VENTURE.
3. Organizing62and62Financing62a62New62Venture.
4. Preparing62and62Using62Financial62Statements.
5. Evaluating62Operating62and62Financial62Performance.6 2
Part623:62PLANNING62FOR62THE62FUTURE.
6. Managing62Cash62Flow.
7. Types62and62Costs62of62Financial62Capital.
8. Securities62Law62Considerations62When62Obtaining62Venture62Financing.6 2
Part624:62CREATING62AND62RECOGNIZING62VENTURE62VALUE.
9. Projecting62Financial62Statements.
10. Valuing62Early-Stage62Ventures.
11. Venture62Capital62Valuation62Methods.
Part625:62STRUCTURING62FINANCING62FOR62THE62GROWING62VENTURE.
12. Professional62Venture62Capital.
13. Other62Financing62Alternatives.
14. Security62Structures62and62Determining62Enterprise62Values.6 2 P
art626:62EXIT62AND62TURNAROUND62STRATEGIES.
15. Harvesting62the62Business62Venture62Investment.
16. Financially62Troubled62Ventures:62Turnaround62Opportunities?6 2 Pa
rt627:62CAPSTONE62CASES.
Case621.62Eco-
Products,62Inc.6 2 Case622.62Spatia
l62Technology,

,Chapter621
INTRODUCTION62TO62FINANCE62FOR62ENTREPRENEURS6 2 FOC

US

The62purpose62of62this62first62chapter62is62to62present62an62overview62of62what62entrepreneurial6
2finance62is6 2 about.62In62doing62so62we62hope62to62convey62to62you62the62importance62of62unde
rstanding62and62applying6 2 entrepreneurial62finance62methods62and62tools62to62help62ensure62a
n62entrepreneurial62venture62is6 2 successful.We62present62a62life62cycle62approach62to62the62tea
ching62of62entrepreneurial62finance62where6 2 we62cover62venture62operating62and62financial62d
ecisions62faced62by62the62entrepreneur62as62a62venture6 2 progresses62from62an62idea62through62
to62harvesting62the62venture.

LEARNING62OBJECTIVES

LO621.1:62Characterize62the62entrepreneurial62process.
LO621.2:62Describe62entrepreneurship62and62some62characteristics62of62entrepren
eurs.6 2 LO621.3:62Indicate62several62megatrends62providing62waves62of62entrepr
eneurial6 2 opportunities.LO621.4:62List62and62describe62the62seven62principles62of
62entrepreneurial6 2 finance.
LO621.5:62Discuss62entrepreneurial62finance62and62the62role62of62the62financial6
2 manager.LO621.6:62Describe62the62various62stages62of62a62successful62venture‘s
62life6 2 cycle.
LO621.7:62Identify,62by62life62cycle62stage,62the62relevant62types62of62financing6
2and6 2 investors.LO621.8:62Understand62the62life62cycle62approach62used62in62thi
s62book.

CHAPTER62OUTLINE

1.1 THE62ENTREPRENEURIAL62PROCESS
1.2 ENTREPRENEURSHIP62FUNDAMENTALS
A. Who62is62an62Entrepreneur?
B. Basic62Definitions
C. Entrepreneurial62Traits62or62Characteristics
D. Opportunities62Exist62But62Not62Without62Risks
1.3 SOURCES62OF62ENTREPRENEURIAL62OPPORTUNITIES
A. Societal62Changes
B. Demographic62Changes
C. Technological62Changes
D. Emerging62Economies62and62Global62Changes
E. Crises62and62 ―Bubbles‖
F. Disruptive62Innovation


1

, 1.4 PRINCIPLES62OF62ENTREPRENEURIAL62FINANCE
A. Real,62Human,62and62Financial62Capital62must62be62Rented62from62Owners62(Principle6
2#1)
B. Risk62and62Expected62Reward62go62Hand62in62Hand62(Principle62#2)
C. While62Accounting62is62the62Language62of62Business,62Cash62is62the62Currency62(Princip
le62#3)
D. New62Venture62Financing62Involves62Search,62Negotiation,62and62Privacy62(Principle62
#4)
E. A62Venture‘s62Financial62Objective62is62to62Increase62Value62(Principle62#5)
F. It62is62Dangerous62to62Assume62that62People62Act62Against62Their62O
wn62Self-6 2 Interests(Principle62#6)
G. Venture62Character62and62Reputation62can62be62Assets62or62Liabilities62(Principle62#7)
1.5 ROLE62OF62ENTREPRENEURIAL62FINANCE
1.6 THE62SUCCESSFUL62VENTURE62LIFE62CYCLE
A. Development62Stage
B. Startup62Stage
C. Survival62Stage
D. Rapid-Growth62Stage
E. Early-Maturity62Stage
F. Life62Cycle62Stages62and62the62Entrepreneurial62Process
1.7 FINANCING62THROUGH62THE62VENTURE62LIFE62CYCLE
A. Seed62Financing
B. Startup62Financing
C. First-Round62Financing
D. Second-Round62Financing
E. Mezzanine62Financing
F. Liquidity-Stage62Financing
G. Seasoned62Financing
1.8 LIFE62CYCLE62APPROACH62FOR62TEACHING62ENTREPRENEURIAL62FINANC
E6 2 SUMMARY


DISCUSSION62QUESTIONS62AND62ANSWERS

1. What62is62the62entrepreneurial62process?

The62entrepreneurial62process62comprises:62developing62opportunities,62gathering62resources,6
2 andmanaging62and62building62operations62with62the62goal62of62creating62value.


2. What62is62entrepreneurship?62What62are62some62basic62characteristics62of62entrepreneurs?

Entrepreneurship62is62the62process62of62changing62ideas62into62commercial62opportunities62and
6 2 creatingvalue.6262While62there62is62no62prototypical62entrepreneur,62many62are62good62at
62recognizing6 2 commercial62opportunities,62tend62to62be62optimistic,62and62envision62a62plan6
2for62the62future.


3. Why62do62businesses62close62or62cease62operating?62What62are62the62primary62reasons62wh
y62businesses6 2 fail?