SOLUTION MANUAL for Entrepreneurial
Finance 7th Edition by J. Leach & Ronald
Melicher
Chapter 1-16 With Cases Products &Spatial Tech|
A+ GRADED
1|Page
, Chapter 1
INTRODUCTION TO FINANCE FOR ENTREPRENEURS FOCUS
The purpose of this first chapter is to present an overview of what entrepreneurial finance is about. In
doing so we hope to convey to you the importance of understanding and applying entrepreneurial finance
methods and tools to help ensure an entrepreneurial venture is successful. We present a life cycle
approach to the teaching of entrepreneurial finance where we cover venture operating and financial
decisions faced by the entrepreneur as a venture progresses from an idea through to harvesting the
venture.
LEARNING OBJECTIVES
LO 1.1: Characterize the entrepreneurial process.
LO 1.2: Describe entrepreneurship and some characteristics of entrepreneurs.
LO 1.3: Indicate several megatrends providing waves of entrepreneurial opportunities. LO 1.4: List and
describe the seven principles of entrepreneurial finance.
LO 1.5: Discuss entrepreneurial finance and the role of the financial manager. LO 1.6: Describe the
various stages of a successful venture‗s life cycle.
LO 1.7: Identify, by life cycle stage, the relevant types of financing and investors. LO 1.8: Understand the
life cycle approach used in this book.
CHAPTER OUTLINE
1.1 THE ENTREPRENEURIAL PROCESS
1.2 ENTREPRENEURSHIP FUNDAMENTALS
A. Who is an Entrepreneur?
B. Basic Definitions
C. Entrepreneurial Traits or Characteristics
D. Opportunities Exist But Not Without Risks
1.3 SOURCES OF ENTREPRENEURIAL OPPORTUNITIES
A. Societal Changes
B. Demographic Changes
2-|-P- a- g- e
,C. Technological-Changes
D. Emerging-Economies-and-Global-Changes
E. Crises-and-―Bubbles
F. Disruptive-Innovation
1
1.4 PRINCIPLES-OF-ENTREPRENEURIAL-FINANCE
A. Real,-Human,-and-Financial-Capital-must-be-Rented-from-Owners-(Principle-#1)
B. Risk-and-Expected-Reward-go-Hand-in-Hand-(Principle-#2)
C. While-Accounting-is-the-Language-of-Business,-Cash-is-the-Currency-(Principle-#3)
D. New-Venture-Financing-Involves-Search,-Negotiation,-and-Privacy-(Principle-#4)
E. A-Venture‗s-Financial-Objective-is-to-Increase-Value-(Principle-#5)
F. It-is-Dangerous-to-Assume-that-People-Act-Against-Their-Own-Self-Interests-(Principle-#6)
G. Venture-Character-and-Reputation-can-be-Assets-or-Liabilities-(Principle-#7)
1.5 ROLE-OF-ENTREPRENEURIAL-FINANCE
1.6 THE-SUCCESSFUL-VENTURE-LIFE-CYCLE
A. Development-Stage
B. Startup-Stage
C. Survival-Stage
D. Rapid-Growth- Stage
E. Early-Maturity-Stage
F. Life-Cycle-Stages-and-the-Entrepreneurial-Process
1.7 FINANCING-THROUGH-THE-VENTURE-LIFE-CYCLE
A. Seed-Financing
3-|-P- a- g- e
, B. Startup-Financing
C. First-Round-Financing
D. Second-Round-Financing
E. Mezzanine-Financing
F. Liquidity-Stage- Financing
G. Seasoned-Financing
1.8 LIFE-CYCLE-APPROACH-FOR-TEACHING-ENTREPRENEURIAL-FINANCE-SUMMARY
DISCUSSION-QUESTIONS-AND-ANSWERS
1. What-is-the-entrepreneurial-process?
The-entrepreneurial-process-comprises:-developing-opportunities,-gathering-resources,-and-managing-
and-building-operations-with-the-goal-of-creating-value.
2. What-is-entrepreneurship?-What-are-some-basic-characteristics-of-entrepreneurs?
Entrepreneurship-is-the-process-of-changing-ideas-into-commercial-opportunities-and-creating-value.-
While-there-is-no-prototypical-entrepreneur,-many-are-good-at-recognizing-commercial-opportunities,-
tend-to-be-optimistic,-and-envision-a-plan-for-the-future.
3. Why-do-businesses-close-or-cease-operating?-What-are-the-primary-reasons-why-businesses-fail?
Nearly-one-half-of-businesses-that-fail-do-so-because-of-economic-factors-including-inadequate-sales,-
insufficient-profits,-and-industry-weakness.-Many-of-the-economic-factors-are-directly-tied-to-financing-
concerns-(e.g.,-insufficient-profits-for-investors).-Almost-40-percent-of-business-failures-not-citing-
economic-factors-cite-specifically-financial-causes-like-excessive-debt-and-insufficient-financial-capital.-
The-remaining-cited-reasons-for-failure-include-a-lack-of-business-and-managerial-experience,-business-
conflicts,-family-problems,-fraud,-and-disasters.-Many-businesses-close-and-fail-due-to-financial-trouble-
which-is-mostly-related-to-lack-of-sales-and-unsatisfactory-profits.
4-|-P- a- g- e
Finance 7th Edition by J. Leach & Ronald
Melicher
Chapter 1-16 With Cases Products &Spatial Tech|
A+ GRADED
1|Page
, Chapter 1
INTRODUCTION TO FINANCE FOR ENTREPRENEURS FOCUS
The purpose of this first chapter is to present an overview of what entrepreneurial finance is about. In
doing so we hope to convey to you the importance of understanding and applying entrepreneurial finance
methods and tools to help ensure an entrepreneurial venture is successful. We present a life cycle
approach to the teaching of entrepreneurial finance where we cover venture operating and financial
decisions faced by the entrepreneur as a venture progresses from an idea through to harvesting the
venture.
LEARNING OBJECTIVES
LO 1.1: Characterize the entrepreneurial process.
LO 1.2: Describe entrepreneurship and some characteristics of entrepreneurs.
LO 1.3: Indicate several megatrends providing waves of entrepreneurial opportunities. LO 1.4: List and
describe the seven principles of entrepreneurial finance.
LO 1.5: Discuss entrepreneurial finance and the role of the financial manager. LO 1.6: Describe the
various stages of a successful venture‗s life cycle.
LO 1.7: Identify, by life cycle stage, the relevant types of financing and investors. LO 1.8: Understand the
life cycle approach used in this book.
CHAPTER OUTLINE
1.1 THE ENTREPRENEURIAL PROCESS
1.2 ENTREPRENEURSHIP FUNDAMENTALS
A. Who is an Entrepreneur?
B. Basic Definitions
C. Entrepreneurial Traits or Characteristics
D. Opportunities Exist But Not Without Risks
1.3 SOURCES OF ENTREPRENEURIAL OPPORTUNITIES
A. Societal Changes
B. Demographic Changes
2-|-P- a- g- e
,C. Technological-Changes
D. Emerging-Economies-and-Global-Changes
E. Crises-and-―Bubbles
F. Disruptive-Innovation
1
1.4 PRINCIPLES-OF-ENTREPRENEURIAL-FINANCE
A. Real,-Human,-and-Financial-Capital-must-be-Rented-from-Owners-(Principle-#1)
B. Risk-and-Expected-Reward-go-Hand-in-Hand-(Principle-#2)
C. While-Accounting-is-the-Language-of-Business,-Cash-is-the-Currency-(Principle-#3)
D. New-Venture-Financing-Involves-Search,-Negotiation,-and-Privacy-(Principle-#4)
E. A-Venture‗s-Financial-Objective-is-to-Increase-Value-(Principle-#5)
F. It-is-Dangerous-to-Assume-that-People-Act-Against-Their-Own-Self-Interests-(Principle-#6)
G. Venture-Character-and-Reputation-can-be-Assets-or-Liabilities-(Principle-#7)
1.5 ROLE-OF-ENTREPRENEURIAL-FINANCE
1.6 THE-SUCCESSFUL-VENTURE-LIFE-CYCLE
A. Development-Stage
B. Startup-Stage
C. Survival-Stage
D. Rapid-Growth- Stage
E. Early-Maturity-Stage
F. Life-Cycle-Stages-and-the-Entrepreneurial-Process
1.7 FINANCING-THROUGH-THE-VENTURE-LIFE-CYCLE
A. Seed-Financing
3-|-P- a- g- e
, B. Startup-Financing
C. First-Round-Financing
D. Second-Round-Financing
E. Mezzanine-Financing
F. Liquidity-Stage- Financing
G. Seasoned-Financing
1.8 LIFE-CYCLE-APPROACH-FOR-TEACHING-ENTREPRENEURIAL-FINANCE-SUMMARY
DISCUSSION-QUESTIONS-AND-ANSWERS
1. What-is-the-entrepreneurial-process?
The-entrepreneurial-process-comprises:-developing-opportunities,-gathering-resources,-and-managing-
and-building-operations-with-the-goal-of-creating-value.
2. What-is-entrepreneurship?-What-are-some-basic-characteristics-of-entrepreneurs?
Entrepreneurship-is-the-process-of-changing-ideas-into-commercial-opportunities-and-creating-value.-
While-there-is-no-prototypical-entrepreneur,-many-are-good-at-recognizing-commercial-opportunities,-
tend-to-be-optimistic,-and-envision-a-plan-for-the-future.
3. Why-do-businesses-close-or-cease-operating?-What-are-the-primary-reasons-why-businesses-fail?
Nearly-one-half-of-businesses-that-fail-do-so-because-of-economic-factors-including-inadequate-sales,-
insufficient-profits,-and-industry-weakness.-Many-of-the-economic-factors-are-directly-tied-to-financing-
concerns-(e.g.,-insufficient-profits-for-investors).-Almost-40-percent-of-business-failures-not-citing-
economic-factors-cite-specifically-financial-causes-like-excessive-debt-and-insufficient-financial-capital.-
The-remaining-cited-reasons-for-failure-include-a-lack-of-business-and-managerial-experience,-business-
conflicts,-family-problems,-fraud,-and-disasters.-Many-businesses-close-and-fail-due-to-financial-trouble-
which-is-mostly-related-to-lack-of-sales-and-unsatisfactory-profits.
4-|-P- a- g- e
