Dollinger index

292 ENTREPRENEURSHIP

DISCUSSION QUESTIONS

1. Why are financial resources not a source of competitive advantage even though they are a
   continuing hurdle for the new venture? (See Chapter 2 for review.)


2. Why is undercapitalization dangerous for a new venture? How can overcapitalization pose
   a problem?


3. What are the elements of the cash flow cycle?


4. How can managing and controlling the cash flow cycle save money?


5. How do the financing needs of the enterprise change over time?


6. What variables affect the choice of financing sources for the entrepreneur?


7. What are the pros and cons of raising startup capital from private investors?


8. What are the pros and cons of going public?

KEY TERMS

Accredited investor
Adjusted book value
Angels
Asset-based financing
Asset-based valuations
Book value
Bootstrapping
Capitalization factor
Cash flow cycle
Cash flow financing
C Corporation
Chapter 7 bankruptcy
Chapter 11 bankruptcy
Chapter 13 bankruptcy
Covenants
Debt-based financing
Discounted cash flow (DCF)
Early-stage financing
Earnings-based valuations
Equity
Expansion or development financing
First-stage financing
Fourth-stage financing
Future earnings
General partnership
Inside equity
Historical earnings
Initial public offering (IPO)
Integration principles

Limited liability company (LLC)

Limited partnership

Liquidation value

Mezzanine financing

Micro loan

Outside equity

Outside equity investors

Overcapitalized

Partnership

Permanent working capital

Phased financing

Price-earnings (P-E) radio

Private placement

Production cycle

Replacement value

Required rate of return

Residual pricing method

Risk capital

S Corporation

Second-stage financing

Seed capital

Small business investment companies (SBICs)

Sole proprietorship

Start-up capital

Temporary working capital

Third-stage financing

Undercapitalized

Venture capital