SOLUTION MANUAL For Entrepreneurial Finance, 7th Edition by J. Chris Leach, Ronald W. Melicher

SOLUTION MANUAL for Entrepreneurial Fi
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nance 7th Edition by J. Leach & Ronald Meli
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cher
Chapter 1- 79



16 With Cases Products &Spatial Tech| A+ GRAD
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, Chapter791

INTRODUCTION79TO79FINANCE79FOR79ENTREPRENEURS79FOCUS

The79purpose79of79this79first79chapter79is79to79present79an79overview79of79what79entrepreneurial79finance79i
s79about.79In79doing79so79we79hope79to79convey79to79you79the79importance79of79understanding79and79applyi
ng79entrepreneurial79finance79methods79and79tools79to79help79ensure79an79entrepreneurial79venture79is79suc
cessful.79We79present79a79life79cycle79approach79to79the79teaching79of79entrepreneurial79finance79where79w
e79cover79venture79operating79and79financial79decisions79faced79by79the79entrepreneur79as79a79venture79pro
gresses79from79an79idea79through79to79harvesting79the79venture.



LEARNING79OBJECTIVES

LO791.1:79Characterize79the79entrepreneurial79process.

LO791.2:79Describe79entrepreneurship79and79some79characteristics79of79entrepreneurs.

LO791.3:79Indicate79several79megatrends79providing79waves79of79entrepreneurial79opportunities.79LO791.4:7
9List79and79describe79the79seven79principles79of79entrepreneurial79finance.


LO791.5:79Discuss79entrepreneurial79finance79and79the79role79of79the79financial79manager.79LO791.6:79Describe79t
he
various79stages79of79a79successful79venture‗s79life79cycle.

LO791.7:79Identify,79by79life79cycle79stage,79the79relevant79types79of79financing79and79investors.79LO791.8:79
Understand79the79life79cycle79approach79used79in79this79book.



CHAPTER79OUTLINE

1.1 THE79ENTREPRENEURIAL79PROCESS

1.2 ENTREPRENEURSHIP79FUNDAMENTALS

A. Who79is79an79Entrepreneur?

B. Basic79Definitions

C. Entrepreneurial79Traits79or79Characteristics

D. Opportunities79Exist79But79Not79Without79Risks

1.3 SOURCES79OF79ENTREPRENEURIAL79OPPORTUNITIES

A. Societal79Changes

B. Demographic79Changes


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,C. Technological79Changes

D. Emerging79Economies79and79Global79Changes

E. Crises79and79―Bubbles

F. Disruptive79Innovation




1



1.4 PRINCIPLES79OF79ENTREPRENEURIAL79FINANCE

A. Real,79Human,79and79Financial79Capital79must79be79Rented79from79Owners79(Principle79#1)

B. Risk79and79Expected79Reward79go79Hand79in79Hand79(Principle79#2)

C. While79Accounting79is79the79Language79of79Business,79Cash79is79the79Currency79(Principle79#3)

D. New79Venture79Financing79Involves79Search,79Negotiation,79and79Privacy79(Principle79#4)

E. A79Venture‗s79Financial79Objective79is79to79Increase79Value79(Principle79#5)

F. It79is79Dangerous79to79Assume79that79People79Act79Against79Their79Own79Self-Interests79(Principle79#6)

G. Venture79Character79and79Reputation79can79be79Assets79or79Liabilities79(Principle79#7)

1.5 ROLE79OF79ENTREPRENEURIAL79FINANCE

1.6 THE79SUCCESSFUL79VENTURE79LIFE79CYCLE

A. Development79Stage

B. Startup79Stage

C. Survival79Stage

D. Rapid-Growth79Stage

E. Early-Maturity79Stage

F. Life79Cycle79Stages79and79the79Entrepreneurial79Process

1.7 FINANCING79THROUGH79THE79VENTURE79LIFE79CYCLE

A. Seed79Financing



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, B. Startup79Financing

C. First-Round79Financing

D. Second-Round79Financing

E. Mezzanine79Financing

F. Liquidity-Stage79Financing

G. Seasoned79Financing

1.8 LIFE79CYCLE79APPROACH79FOR79TEACHING79ENTREPRENEURIAL79FINANCE79SUMMARY




DISCUSSION79QUESTIONS79AND79ANSWERS

1. What79is79the79entrepreneurial79process?

The79entrepreneurial79process79comprises:79developing79opportunities,79gathering79resources,79and79manag
ing79and79building79operations79with79the79goal79of79creating79value.



2. What79is79entrepreneurship?79What79are79some79basic79characteristics79of79entrepreneurs?

Entrepreneurship79is79the79process79of79changing79ideas79into79commercial79opportunities79and79creating79
value.79While79there79is79no79prototypical79entrepreneur,79many79are79good79at79recognizing79commercial79
opportunities,79tend79to79be79optimistic,79and79envision79a79plan79for79the79future.



3. Why79do79businesses79close79or79cease79operating?79What79are79the79primary79reasons79why79businesses79fail
?

Nearly79one-
half79of79businesses79that79fail79do79so79because79of79economic79factors79including79inadequate79sales,79ins
ufficient79profits,79and79industry79weakness.79Many79of79the79economic79factors79are79directly79tied79to79fi
nancing79concerns79(e.g.,79insufficient79profits79for79investors).79Almost794079percent79of79business79failur
es79not79citing79economic79factors79cite79specifically79financial79causes79like79excessive79debt79and79insuffi
cient79financial79capital.79The79remaining79cited79reasons79for79failure79include79a79lack79of79business79and
79managerial79experience,79business79conflicts,79family79problems,79fraud,79and79disasters.79Many79busines

ses79close79and79fail79due79to79financial79trouble79which79is79mostly79related79to79lack79of79sales79and79unsa
tisfactory79profits.




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