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Midterm

Financing Cont - not on midterm.docx

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Department
Business
Course
BU121
Professor
Roopa Reddy
Semester
Winter

Description
Financing Cont’d – - Businesses that show a profit can still go bankrupt o Lack of ‘real’ cash – profit is locked in accounts receivables o Profit doesn’t = cash - Breakeven o Contribution margin – the higher this is the easier it is to reach breakeven (less to sell) – you want to keep your variable costs low o VCRR – Variable cost to …. o They go hand in hand – and equal 100 NOT ON MID-TERM Principle 1 – entrepreneurial finance: - Real human and financial capital must be ‘rented’ from owners Principle 5 - A ventures financial objective is to increase value - Different measures at different stages o Development stages, survival stage, rapid-growth stage - Development and startup issues o Cash burn rate – how quickly a venture uses cash o Liquidity – ability to meet short-term financial loans o Conversion Period – how quickly you convert to cash – capital cycle (industry dependent) - Survival Issues o Leverage – you are borrowing other people’s money to try to make more money – taking on debt to try to get more inventory to be able to supply, etc. o Profitability and Efficiency – how profitable are you? How efficient? Investment returns Financial Ratios - Ratio groupings o Liquidity – ability to meet sh
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