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SeanHatfield
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How productively a firm utilizes its assets.
Efficiency
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Company's ability to meet its short term obligations.
Liquidation
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Summarizes the changes in a firm’s cash position for a specified period of time and details why the changes occurred.
Statement of Cash Flow
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Reflects the results of the operations of a firm over a specified period of time. It records all the revenues and expenses for the given period and shows whether the firm is making a profit or is experiencing a loss.
Income Statement
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Is a snapshot of a company’s assets, liabilities, and owner’s equity at a specific point in time.
Balance Sheet
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What is the formula for Current Ratio.
Current Assets / Current Liabilities
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Company's ability to make $$$
Profibility
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Overall health of the financial structure of the firm, particularly as it relates to its debt to-equity ratio. -aim for 1:2
Stability
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Summary of finance over a period of time.
Income Statement
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Summary of business finance at a current time.
Balance Sheet
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How cash comes in and out over a period of time.
Cash Flow Statement
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What are the 3 reasons why most new ventures need financing or funding
- Cash Flow Challenges
- Capital Investments
- Lengthy Product Development Cycles
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Which of the 3 reasons ventures need funding is this:
Inventory must be purchased, employees must be trained and paid, and advertising must be paid for before cash is generated from sales.
Cash Flow Challenges
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Which of the 3 reasons ventures need funding is this:
The cost of buying real estate, building facilities, and purchasing equipment typically exceeds a firm's ability to provide funds for these needs on its own.
Capital Investments
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Which of the 3 reasons ventures need funding is this:
Some products are in development for years before they generate earnings. The up-front costs often exceed a firm's ability to fund these activities on its own.
Lengthy Product Development Cycles.
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What is the order of raising funds?
- 1. Personal funds
- 2. Friends and family
- 3. Bootstrapping
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Finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost cutting, or any means necessary.
Bootstrapping
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What are some examples of bootstrapping?
-Buying used instead of new equipment.
-Coordinating purchases with other businesses.
-Leasing equipment instead of buying.
- -Obtaining payments in advance from customers.
- -Minimizing personal expenses.
-Avoiding unnecessary expenses.
-Buying items cheaply but prudently via options such as eBay.
-Sharing office space or employees with other businesses.
-Hiring interns.
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Individuals who invest their personal capital directly in start-ups. Typically 50 years old, has high income and wealth, is well educated, has succeeded as an entrepreneur, and is interested in the start-up process.
Angel Investors
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Reasonable steps taken by a person in order to satisfy a legal requirement, especially in buying or selling something.
A comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential.
Due Diligence
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The initial capital used to start a business. Often comes from the company founders' personal assets or from friends and family.
Seed Funding
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A company’s first sale of stock to the public. When a company goes public, its stock is traded on one of the major stock exchanges.
Initial Public Offering (IPO)
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Most entrepreneurial firms that go public trade on the...
NASDAQ
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What is Intellectual Property?
Any product of human intellect that is intangible but has value in the marketplace.
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Why is it called "Intellectual Property"?
Because it is the product of human imagination, creativity, and inventiveness.
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Why is intellectual property an important issue for entrepreneurs?
A company’s intellectual assets are the most important – AS THEY MAY BE A SOURCE OF A COMPETITIVE ADVANTAGE!
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What are the 4 forms of intellectual property?
- Copyrights
- Trademarks
- Patents
- Trade Secrets
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What are the 3 basic requirements to grant a patent?
- -Must be useful (utility).
- -Must be novel (original).
- -Must not be obvious to a person of ordinary skill in the field.
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A patent that protects an invention that is or facilitates a method of doing business.
Business Method Patent
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What are Trademarks?
Any word, name, symbol, or device used to identify the source or origin of products or services and to distinguish those product or services from others.
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What are the different kinds of Trademarks?
- -Trademark
- -Service Mark
- -Collective Mark
- -Certification Mark
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What are some examples of a Certification Mark?
Marks, words, names, symbols, or devices used by a person other than the owner to certify a particular quality about a good or service.
Examples: 100% Napa Valley and Underwriters Laboratories
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What are some exclusions of Copyright Laws?
- The Idea-Expression Dichotomy.
- The main exclusion is that copyright laws cannot protect ideas.
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What are some examples of Trade Secrets?
Trade secrets include marketing plans, product formulas, financial forecasts, employee rosters, logs of sales calls, and similar types of proprietary information.
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What are the 3 things to prepare for growth?
- 1. Appreciate the nature of business growth.
- 2. Stay committed to a core strategy.
- 3. Plan for growth.
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What are the 10 warning signs of a business growing too fast?
- -Borrowing money to pay for routine operating expenses.
- -Extremely tight profit margins.
- -Over-stretched staff.
- -Declining product quality.
- -Unanswered emails.
- -Customer Complaints.
- -Employees dread coming to work.
- -Productivity is falling.
- -Operating in a "crisis mode" becomes the norm.
- -Those working with the business financial structure are starting to worry.
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Occurs when increasing production
lowers the average cost of each unit produced.
Economics of Scale
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What are the 5 stages of growth?
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Variable Costs vs. Fixed Costs
Variable Costs: Costs that vary on production. (Resources)
Fixed Costs: Costs that don't vary. (Rent, Insurance)
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Managerial Capacity Problem
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What are some day-to-day challenges of growth?
Cash Flow Management: A firm requires an increasing amount of cash as it grows.
Price Stability: If growth comes at the expense of a competitor’s market share, a price war could ensue.
Quality Control: An increase in firm activity can result in quality control issues if a firm is not able to increase its resources to handle the extra work.
Capital Constraints: Capital constraints are an ever-present problem for growing firms.
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If growth comes at the expense of a competitor’s market share, a price war could ensue.
Price Stability
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Increasing the sales of a product or service through greater marketing efforts or through increased production capacity.
Market Penetration Strategy
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Making additional variations of a product so it will appeal to a broader range of clientele.
Product Line Extension Stategy
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Growth via expanding to additional geographic locations.
Geographic Expansion
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What are some examples of Foreign Market Entry Strategies?
- -Exporting
- -Licensing
- -Joint Ventures
- -Franchising
- -Turnkey Project
- -Wholly Owned Subsidiary
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What are some advantages / disadvantages with External Growth Strategies?
Advantages:
•Reducing - competition
- •Gaining access to proprietary products or services
- •Gaining access to new products and markets
- •Obtaining access to technical expertise
- •Gaining access to an established brand name
- •Economies of scale
- •Diversification of business risk
- Disadvantages:
- •Incompatibility
- of top management
- •Clash of corporate cultures
- •Operational problems
- •Increased business complexity
- • Loss of organizational flexibility
- •Antitrust implications
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An arrangement whereby a firm with the proprietary rights to a product grants permission to another firm to manufacture that product for specified royalties or other payments.
Licensing
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A partnership between two or more firms developed to achieve a specific goal.
Strategic Alliances
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What are some advantages / disadvantages of Internal Growth Strategies?
- Advantages:
- •Incremental, even-paced growth
- • Provides maximum control
- •Preserves organizational culture
- •Encourages internal entrepreneurship
- •Allows firms to promote from within
Disadvantages:
•Slow form of growth - •Need to develop new resources
- •Investment in a failed internal growth strategy can be difficult to recoup
- •Adds to industry capacity
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