BU121 Midterm: BU-121 SOS Slides Finance Theory

83 views3 pages
23 Feb 2017
School
Department
Course
Professor
7 Principles of Entrepreneurial Finance
Real human, financial capital must be rented from owners
Risk and expected reward go hand in hand
While accounting is the language of business, cash is the currency
New venture financing involves search, negotiation, and privacy
A eture’s fiaial ojetie is to irease alue
It is dangerous to assume that people act against their own self-interest
Venture character and reputation can be assets or liabilities
Cash vs. Profit
A company that is profitable can go bankrupt
Accounts Receivable
o If opaies do’t ollet ash fro sales, the ioe stateet ill sho profit, ut
there will be no cash to pay off debts
Accounts Payable
o Also, if you have cash on hand but owe debts to the bank or other lenders you can go
bankrupt
Amortization
o Value of Assets can change quickly
Cost Types
Fixed Costs
o Costs that are fairly pre-determined
o Expected to remain fixed over a range of revenues for a set period of time
Variable Costs
o Costs that are linked to the level of production
o Production levels = sales levels
o Costs resulting from providing a product or delivering a service, dependent on the
volume of sales
Contribution
Contribution
o Value, What you get what you give
 �� =  −   � 
��  � = � � − �   �
Contribution is the left over amount that will be put towards covering the fixed costs after
covering the variable costs
Survival Cash Flows
Survival Cash flow breakeven is when EBDAT = 0
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows page 1 of the document.
Unlock all 3 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Real human, financial capital must be rented from owners. Risk and expected reward go hand in hand. While accounting is the language of business, cash is the currency. New venture financing involves search, negotiation, and privacy. A (cid:448)e(cid:374)ture"s fi(cid:374)a(cid:374)(cid:272)ial o(cid:271)je(cid:272)ti(cid:448)e is to i(cid:374)(cid:272)rease (cid:448)alue. Venture character and reputation can be assets or liabilities. It is dangerous to assume that people act against their own self-interest. A company that is profitable can go bankrupt. If (cid:272)o(cid:373)pa(cid:374)ies do(cid:374)"t (cid:272)olle(cid:272)t (cid:272)ash fro(cid:373) sales, the i(cid:374)(cid:272)o(cid:373)e state(cid:373)e(cid:374)t (cid:449)ill sho(cid:449) profit, (cid:271)ut there will be no cash to pay off debts. Accounts payable: also, if you have cash on hand but owe debts to the bank or other lenders you can go bankrupt. Amortization: value of assets can change quickly. Fixed costs: costs that are fairly pre-determined, expected to remain fixed over a range of revenues for a set period of time.

Get access

Grade+
$10 USD/m
Billed $120 USD annually
Homework Help
Class Notes
Textbook Notes
40 Verified Answers
Study Guides
Booster Classes