Term
| Entrepreneurial Finance Principles |
|
Definition
1. Capital must be rented from owners
2. Risk and Reward go hand in hand
3. Accounting is the language of business, Cash is the currency
4. Financing involves Search, Negotiation and Privacy
5. A ventures Objective is to increase Value
6. It is dangerous to assume people act against their own self-interest
7. Character and Reputation can be assets or liabilities |
|
|
Term
|
Definition
| application and adaptation of financial tools and techniques to the planning, funding, operation, and valuation of an entrepreneurial venture |
|
|
Term
|
Definition
1. Development Stage
2. Startup Stage
3. Survival Stage
4. Rapid-Growth Stage
5. Maturity Stage |
|
|
Term
| Financing through the life cycle |
|
Definition
Development Stage
Developing opportunities and seed financing
Startup Stage
Gathering resources and startup financing
Survival Stage
Gathering resources, managing and building operations and first-round financing
Rapid-Growth Stage
Managing and building operations and second-round mezzanine, & liquidity stage financing
Early Maturity Stage
Managing and building operations and obtaining bank loans, issuing bonds, & issuing stock |
|
|
Term
| Components of a sound business model |
|
Definition
1. Generate Revenues
2. Make Profits
3. Produce Free Cash Flows |
|
|
Term
| A Viable Venture Opportunity |
|
Definition
| creates or meets a customer need, provides an initial competitive advantage, is timely in terms of time-to-market, and offers the expectation of added value to investors |
|
|
Term
|
Definition
1. The Big Picture
2. Know Thy Customer
3. Production and Development Challenges
4. Financial Fortune-Telling |
|
|
Term
ROA Model
Asset intensity |
|
Definition
ROA = NPM x ATO
assets/revenues (opposite of ATO) |
|
|
Term
|
Definition
| cash remaining after operating cash outflows, financing and tax cash flows, investment in assets needed to sustain the venture’s growth, and net increases in debt capital |
|
|
Term
|
Definition
business venture owned by an individual who is personally liable for the venture’s liabilities
unlimited liability |
|
|
Term
|
Definition
| business venture owned by two or more individuals who are jointly and personally liable for the venture’s liabilities |
|
|
Term
|
Definition
Corporation:
a legal entity that separates personal assets of the owners (shareholders) from the assets of the business
Limited Liability:
creditors can seize the corporation’s assets but have no recourse against the shareholders’ personal assets
Corporate Charter:
legal document that establishes the corporation
S Corporation:
provides limited liability for shareholders; plus, corporate income is taxed like personal income to the shareholders |
|
|
Term
|
Definition
Patents
Trade Secrets
Trademarks
Copyrights |
|
|
Term
|
Definition
Utility Patents:
cover mechanical or general inventions, chemical inventions, and electrical inventions
2. Design Patents:
cover the “appearance” of items (e.g., sports uniforms, electronic products, and autos)
3. Plant Patents:
protect discoveries of asexual reproduction methods of new plant varieties
4. Business Method Patents:
protect specific ways of doing business and the underlying computer codes and technology |
|
|
Term
|
Definition
|
|
Term
| Internal Operating schedules |
|
Definition
Cost of Production Schedule
important for preparing the income statement
Cost of Goods Sold Schedule
important for preparing the income statement
Inventories Schedule
important for preparing the balance sheet |
|
|
Term
|
Definition
|
|
Term
|
Definition
| Cash Burn = Inventory-related expenses + Admin expenses + Marketing expenses + R& D expense + Interest expenses + Change in prepaid expenses – (Change in accrued liabilities + Change in payables) + Capital investment + Taxes |
|
|
Term
|
Definition
| Cash Build = Net sales – Change in receivables |
|
|
Term
|
Definition
| Average current assets – Average inventories/ Average current liabilities |
|
|
Term
|
Definition
| Ave. current assets – Ave. current liabilities/Ave. total assets |
|
|
Term
|
Definition
| Ave. Inventories/(CGS / 365) |
|
|
Term
|
Definition
| Ave Receivables/(Net Sales/365) |
|
|
Term
|
Definition
| Ave Payables + Ave Accrued Liabilities/(COGS / 365) |
|
|
Term
|
Definition
Inventory-to-Sale Conversion Period
+ Sale-to-Cash Conversion Period
– Purchase-to-Payment Conversion |
|
|
Term
|
Definition
| Ave total assets / Ave owners’ equity |
|
|
Term
|
Definition
|
|
Term
|
Definition
| (Net profit / sales) x (Net sales / Ave. total assets) x (Ave. total assets / Ave. equity) |
|
|
Term
|
Definition
| (Net profit / sales) x (Net sales / Ave. total assets) |
|
|
