Entrepreneurial Finance: Concepts and Cases, Second Edition
By Miranda S Lam and Gina Vega
Case Contributors viii
Getting Started with Cases 1
1 Case Preparation and Analysis for Students 3
Appendix 1.1 9
Appendix 1.2 10
Appendix 1.3 12
Appendix 1.4 13
Appendix 1.5 15
Getting Money and Getting Going 17
2 Forms of Business Organization 19
Case Study 2.1 32
Case Study 2.2 34
3 Starting a New Venture 37
Case Study 3.1 48
Case Study 3.2 53
4 Financing a Business 59
Case Study 4.1 88
Case Study 4.2 90
Measuring Performance in the Short Term 93
5 Financial Statements and Analysis 95
Appendix 5.1 124
Appendix 5.2 125
Appendix 5.3 127
Case Study 5.1 129
6 Cash and Working Capital Management 139
Case Study 6.1 162
Case Study 6.2 164
The Mechanics of Finance 167
7 Forecasting Cash Flows 169
Case Study 7.1 193
8 Pro Forma Financial Statements 196
Case Study 8.1 232
Case Study 8.2 235
Measuring Performance in the Long Term 241
9 Capital Budgeting and Costs of Capital 243
Appendix 9.1 268
Case Study 9.1 270
Case Study 9.2 273
10 Business Valuation 277
Case Study 10.1 295
Case Study 10.2 297
Exit Strategies 303
11 Exit and Harvest 305
Case Study 11.1 321
Case Study 11.2 322
A Winning Approach 329
12 How to Win Business Plan Competitions 331
We came to write this book initially out of frustration! Our undergraduate nonfinance students were struggling to learn the basics of finance for entrepreneurs because of the density with which most books on the subject were written. We thought carefully about this and concluded that it’s just not that hard. If presented in a need- to- know way, the complexities of entrepreneurial finance could be made accessible to undergraduate business students, without dumbing down the content. Plus, we are both committed to teaching with cases and believe passionately that students’ ability to apply concepts appropriately can be developed through the use of case examples.
As a finance professor and an entrepreneurship professor who have written together successfully in the past, we decided to test the market and determine the interest level among our peers nationally. We asked at conferences, we examined the existing books, and we spoke to as many colleagues as were willing to discuss our proposed project. The response was universally favorable so two purists began the process of unpacking finance to its critical elements and soliciting new, unpublished cases about real companies to illustrate these elements.
The result was the first edition of this text, designed for handling the unique financial challenges often faced by start- ups and small businesses, written for the upper- level undergraduate business major and focuses heavily on the basics. The second edition has the same goals for the same audience, but the audience and the business environment have both changed in the intervening half dozen years. New business models and practices have evolved. Technology has improved and become much more sophisticated. Funding methods have become more complex and more varied.
Thanks to the input of many in the teaching community (and to student input as well), we have made meaningful changes to this edition of Entrepreneurial Finance: Concept and Cases, while leaving the fundamentals unchanged except for updates. The following are the changes we have made for the second edition:
- We have placed more focus on online business, business start- ups, crowdfunding and other funding sources, and social ventures.
- We developed a dedicated website for faculty with lecture slides, case teaching notes, spreadsheet templates and solutions, test bank, and interactive exercises. We have made corrections in some of the data.
- We expanded the chapters on forms of business ownership and financing.
- We added a new chapter on business models.
- We updated several cases, removed four cases, and included seven additional new cases.
- We deleted some less useful appendix material.
Each main concept is illustrated by a short case (between 500 and 1,500 words), followed by thoughtful questions to enhance learning. These cases are written by an international group of experienced case writers from the fields of finance and entrepreneurship and deal with real companies, real problems, and currently unfolding issues. The 12 chapters or building blocks of entrepreneurial finance are designed to be taught across a full semester. A starting chapter that provides guidance about the use of cases for students and a concluding chapter that delivers information about how to win business plan competitions round out the offering.
We hope you will find this text as useful as we found it enjoyable to write!
Miranda S. Lam