SOLUTION MANUAL
Entrepreneurial Finance, 7th Edition
by J. Chris Leach, Ronald W. Melicher
SC
O
R
EG
U
ID
ES
, Table of Content
Part 1. The Entrepreneurial Environment
Chapter 1. Introduction to Finance for Entrepreneurs
Chapter 2. Developing the Business Idea
Part 2. Organizing and Operating the Venture
Chapter 3. Organizing and Financing a New Venture
Chapter 4. Preparing and Using Financial Statements
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Chapter 5. Evaluating Operating and Financial Performance
Part 3. Planning for the Future
Chapter 6. Managing Cash Flow
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Chapter 7. Types and Costs of Financial Capital
Chapter 8. Securities Law Considerations When Obtaining Venture Financing
R
Part 4. Creating and Recognizing Venture Value
Chapter 9. Projecting Financial Statements
EG
Chapter 10. Valuing Early-Stage Ventures
Chapter 11. Venture Capital Valuation Methods
Part 5. Structuring Financing for the Growing Venture
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Chapter 12. Professional Venture Capital
Chapter 13. Other Financing Alternatives
ID
Chapter 14. Security Structures and Determining Enterprise Values
Part 6. Exit and Turnaround Strategies
ES
Chapter 15. Harvesting the Business Venture Investment
Chapter 16. Financially Troubled Ventures: Turnaround Opportunities?
Part 7. Capstone Cases
, 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
SC
venture.
LEARNING OBJECTIVES
LO 1.1: Characterize the entrepreneurial process.
O
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
R
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
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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.
U
CHAPTER OUTLINE
1.1 THE ENTREPRENEURIAL PROCESS
ID
1.2 ENTREPRENEURSHIP FUNDAMENTALS
A. Who is an Entrepreneur?
B. Basic Definitions
ES
C. Entrepreneurial Traits or Characteristics
D. Opportunities Exist But Not Without Risks
1.3 SOURCES OF ENTREPRENEURIAL OPPORTUNITIES
A. Societal Changes
B. Demographic Changes
, C. Technological Changes
D. Emerging Economies and Global Changes
E. Crises and —Bubbles
F. Disruptive Innovation
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1
1.4 PRINCIPLES OF ENTREPRENEURIAL FINANCE
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A. Real, Human, and Financial Capital must be Rented from Owners (Principle #1)
B. Risk and Expected Reward go Hand in Hand (Principle #2)
R
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)
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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)
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1.5 ROLE OF ENTREPRENEURIAL FINANCE
1.6 THE SUCCESSFUL VENTURE LIFE CYCLE
ID
A. Development Stage
B. Startup Stage
C. Survival Stage
ES
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
Entrepreneurial Finance, 7th Edition
by J. Chris Leach, Ronald W. Melicher
SC
O
R
EG
U
ID
ES
, Table of Content
Part 1. The Entrepreneurial Environment
Chapter 1. Introduction to Finance for Entrepreneurs
Chapter 2. Developing the Business Idea
Part 2. Organizing and Operating the Venture
Chapter 3. Organizing and Financing a New Venture
Chapter 4. Preparing and Using Financial Statements
SC
Chapter 5. Evaluating Operating and Financial Performance
Part 3. Planning for the Future
Chapter 6. Managing Cash Flow
O
Chapter 7. Types and Costs of Financial Capital
Chapter 8. Securities Law Considerations When Obtaining Venture Financing
R
Part 4. Creating and Recognizing Venture Value
Chapter 9. Projecting Financial Statements
EG
Chapter 10. Valuing Early-Stage Ventures
Chapter 11. Venture Capital Valuation Methods
Part 5. Structuring Financing for the Growing Venture
U
Chapter 12. Professional Venture Capital
Chapter 13. Other Financing Alternatives
ID
Chapter 14. Security Structures and Determining Enterprise Values
Part 6. Exit and Turnaround Strategies
ES
Chapter 15. Harvesting the Business Venture Investment
Chapter 16. Financially Troubled Ventures: Turnaround Opportunities?
Part 7. Capstone Cases
, 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
SC
venture.
LEARNING OBJECTIVES
LO 1.1: Characterize the entrepreneurial process.
O
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
R
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
EG
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.
U
CHAPTER OUTLINE
1.1 THE ENTREPRENEURIAL PROCESS
ID
1.2 ENTREPRENEURSHIP FUNDAMENTALS
A. Who is an Entrepreneur?
B. Basic Definitions
ES
C. Entrepreneurial Traits or Characteristics
D. Opportunities Exist But Not Without Risks
1.3 SOURCES OF ENTREPRENEURIAL OPPORTUNITIES
A. Societal Changes
B. Demographic Changes
, C. Technological Changes
D. Emerging Economies and Global Changes
E. Crises and —Bubbles
F. Disruptive Innovation
SC
1
1.4 PRINCIPLES OF ENTREPRENEURIAL FINANCE
O
A. Real, Human, and Financial Capital must be Rented from Owners (Principle #1)
B. Risk and Expected Reward go Hand in Hand (Principle #2)
R
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)
EG
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)
U
1.5 ROLE OF ENTREPRENEURIAL FINANCE
1.6 THE SUCCESSFUL VENTURE LIFE CYCLE
ID
A. Development Stage
B. Startup Stage
C. Survival Stage
ES
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
