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

SOLUTIONMANUALForEntrepreneurialFinance,7thEdition
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byJ. Chris Leach,RonaldW. Melicher,Chapters 1 -16,
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e Complete With CAPSTONE CASES
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,TABLEOFCONTENTS e e e




Part 1: THE ENTREPRENEURIAL ENVIRONMENT.
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1. Introduction to Finance e e e




forEntrepreneurs.
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2. DevelopingtheBusinessIdea. e e e




Part2:ORGANIZINGAND OPERATINGTHEVENTURE.
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3. OrganizingandFinancingaNewVenture. e e e e e




4. PreparingandUsingFinancialStatements. e e e e




5. EvaluatingOperatingandFinancialPerformance. e e e e




Part 3: PLANNING FOR THE FUTURE.
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6. Managing CashFlow. e e




7. TypesandCostsofFinancialCapital. e e e e e




8. SecuritiesLawConsiderationsWhenObtainingVentureFinancing. e e e e e e




Part 4: CREATING AND RECOGNIZING VENTURE VALUE.
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9. Projecting Financial Statements. e e




10. Valuing Early-Stage Ventures. e e




11. Venture Capital Valuation Methods. e e e




Part 5: STRUCTURING FINANCING FOR THE GROWING VENTURE.
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12. Professional VentureCapital. e e




13. OtherFinancingAlternatives. e e




14. SecurityStructuresandDeterminingEnterpriseValues. e e e e e




Part 6: EXIT AND TURNAROUND STRATEGIES.
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15. HarvestingtheBusinessVentureInvestment. e e e e




16. FinanciallyTroubledVentures:TurnaroundOpportunities? e e e e




Part 7: CAPSTONE CASES.
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Case 1. Eco-Products, Inc.
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e Case2.SpatialTechnology,
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,Chapter 1 e




INTRODUCTION TO FINANCE FOR ENTREPRENEURS e e e e




e FOCUS

Thepurposeof this first chapter is to present an overviewof what entrepreneurialfinance is about. In doing so we
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hope to convey to you the importance of understanding and applying entrepreneurial finance methods and tools to
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help ensure an entrepreneurial venture is successful.We present a life cycle approach to the teaching of
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entrepreneurial finance where we cover venture operating and financial decisions faced bytheentrepreneurasa
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ventureprogressesfroman ideathroughtoharvestingtheventure.
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LEARNING OBJECTIVES e




LO 1.1: Characterize the entrepreneurial process.
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LO1.2:Describeentrepreneurshipand some characteristicsofentrepreneurs.
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LO 1.3: Indicate several megatrends providing waves of entrepreneurial opportunities.LO 1.4: List and
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describe the seven principles of entrepreneurial finance.
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LO1.5: Discuss entrepreneurial financeand the roleof the financial manager.LO 1.6: Describe
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the various stages of a successful venture‘s life cycle.
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LO1.7: Identify, by lifecyclestage,therelevant types of financing andinvestors.LO1.8: Understandthe
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lifecycleapproachusedinthisbook.
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CHAPTER OUTLINE e




16.1 THE ENTREPRENEURIAL PROCESS e e




16.2 ENTREPRENEURSHIP FUNDAMENTALS e




A. WhoisanEntrepreneur? e e e




B. Basic Definitions e




C. Entrepreneurial Traits or Characteristics e e e




D. Opportunities Exist But Not Without Risks e e e e e




16.3 SOURCES OF ENTREPRENEURIAL OPPORTUNITIES e e e




A. SocietalChanges e




B. Demographic Changes e




C. Technological Changes e




D. Emerging Economies and Global Changes e e e e




E. Crisesand―Bubbles‖ e e




F. Disruptive Innovation e




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, 16.4 PRINCIPLES OF ENTREPRENEURIAL FINANCE e e e




A. Real,Human, andFinancialCapitalmust beRentedfromOwners(Principle#1) e e e e e e e e e e e




B. RiskandExpectedRewardgoHandinHand(Principle#2) e e e e e e e e e




C. While Accounting is the Language of Business, Cash is the Currency (Principle #3) e e e e e e e e e e e e




D. New Venture Financing Involves Search, Negotiation, and Privacy (Principle #4) e e e e e e e e e




E. A Venture‘s Financial Objective is to Increase Value (Principle #5)
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F. ItisDangeroustoAssumethatPeopleActAgainstTheirOwnSelf-Interests
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(Principle #6) e e




G. VentureCharacterand Reputation can beAssets orLiabilities (Principle #7) e e e e e e e e e e




16.5 ROLE OF ENTREPRENEURIAL FINANCE e e e




16.6 THESUCCESSFULVENTURELIFECYCLE e e e e




A. DevelopmentStage e




B. Startup Stage e




C. Survival Stage e




D. Rapid-GrowthStage e




E. Early-Maturity Stage e




F. Life Cycle Stages and the Entrepreneurial Process e e e e e e




16.7 FINANCING THROUGH THE VENTURE LIFE CYCLE e e e e e




A. Seed Financing e




B. Startup Financing e




C. First-RoundFinancing e




D. Second-Round Financing e




E. Mezzanine Financing e




F. Liquidity-Stage Financing e




G. Seasoned Financing e




16.8 LIFE CYCLE APPROACH FOR TEACHING ENTREPRENEURIAL FINANCE
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SUMMARY
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DISCUSSIONQUESTIONSANDANSWERS e e e




1. What is the entrepreneurial process?
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Theentrepreneurial process comprises: developing opportunities, gathering resources, and
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managing 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 creatingvalue. While e e e e e e e e e e e e




there is no prototypical entrepreneur, many are good at recognizing commercial opportunities, tendtobe
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optimistic,andenvisionaplanforthefuture.
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3. Whydobusinesses closeorcease operating? Whatare theprimaryreasons whybusinessesfail?
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