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FIN 470 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Bridge financing 

A

Temporary funding used to cover short-term expenses until long-term financing is secured 

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2
Q

Business Angels 

A

Wealthy individuals who invest in startups often providing not just funds, but also mentorship 

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3
Q

Commercial banks 

A

Financial institutions that offer loans, deposit accounts, and other financial services to businesses and individuals 

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4
Q

Development stage

A

A period involving the progression from an idea to a promising business opportunity 

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5
Q

Development stage

A

The phase where a business idea is developed into a viable product or service prior to market introduction 

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6
Q

E-commerce

A

The use of electronic means to conduct business online

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7
Q

Early maturity stage

A

A phase and a companies life cycle, where growth slows and the focus shifts to maintaining market position

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8
Q

Early Stage ventures

A

New or very young firms with little operating history

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9
Q

Entrepreneur

A

An individual who starts and runs a business, taking on financial risk in the hope of profit

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10
Q

Entrepreneurial finance

A

The application and adaption of financial tools and techniques to the planning, funding, operations, and valuation of an entrepreneurial venture

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11
Q

Entrepreneurial opportunities

A

Ideas with potential to create value through different or new repackaged or repositioned, products, markets, processes, or services 

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12
Q

Entrepreneurial process

A

The steps and activities involved in starting and growing a business, including idea generation, business planning, financing and growth

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13
Q

Entrepreneurship

A

The act of creating, managing, and scaling a business venture 

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14
Q

Financial distress

A

A situation where a business cannot meet its financial obligations, potentially leading to bankruptcy 

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15
Q

First round financing

A

Equity funds provided during the survival stage to cover the cash shortfall when expenses and investments exceed revenues 

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16
Q

Free cash

A

Cash exceeding that which is needed to operate, pay creditors and invest in assets 

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17
Q

Free cash flow

A

Change in free cash over time

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18
Q

Government assistance programs

A

Financial support, such as low interest rate loans and tax incentives provided by state and local governments to help small businesses 

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19
Q

Initial public offering IPO

A

The process by which a private company offers shares to the public for the first time

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20
Q

Investment banking firms

A

Firms that assist businesses in raising capital, advising on mergers and acquisitions and providing other financial services 

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21
Q

Investment banker

A

An individual working for an investment baking firm who advises and assist corporations in their security, financing decisions, and regarding mergers and acquisitions

22
Q

Mezzanine Financing

A

A hybrid of debt and equity financing typically used to fund a companies expansion at a later stage 

23
Q

Owner debt holder conflict

A

Divergence of the owners and lenders self interest as the firm gets close to bankruptcy 

24
Q

Owner manager conflicts

A

Differences between managers, self interest, and that of the owners who hired them

25
Q

Private financial markets

A

Markets were securities are not publicly traded, and transactions occurred directly between investors and businesses

26
Q

Public financial markets

A

Markets were securities are traded publicly such as stock exchanges

27
Q

Rapid growth stage

A

Period of very rapid revenue and cash flow

28
Q

Seasoned firms

A

Established companies with a proven track record and stable market presence

29
Q

Seasoned securities offering

A

The offering of securities by a firm that has previously offered the same or substantially similar securities

30
Q

Second round financing

A

Financing for ventures in their rapid growth stage to support investments in working capital

31
Q

Seed financing

A

Initial capital used to start a business often coming from the founders or early investors

32
Q

Small business administration SBA

A

US government agency that provides support to small businesses through loans, grants and other programs

33
Q

Start up financing

A

Capital provided to a business in its early stages typically used to develop a product and launch operations

34
Q

Start up Stage

A

The initial phase of a business’s life cycle, where it is beginning to establish itself in the market 

35
Q

Survival stage

A

The phase where a new business works to establish itself and generate enough revenue to cover its cost

36
Q

Trade credit

A

A type of short-term financing where suppliers allow businesses to purchase goods and pay for them in a later date

37
Q

Venture capital

A

Early stage financial capital often involving substantial risk of total loss

38
Q

Venture capital firms

A

Firms formed to raise and distribute venture capital to new and fast growing ventures 

39
Q

Venture capitalists VC

A

Individuals who join in formal, organized firms to raise and distribute venture capital to new and fast growing ventures 

40
Q

Venture law firms

A

Law firms that specialize in legal services for startups and venture capital transactions 

41
Q

Venture life cycle

A

The stages of development and growth that a business goes through from start up to maturity
- development stage: a period involving the progression from an idea to the promising business opportunity
- Start up Stage: . When the venture is organized, developed and initial revenue model is put in place. 
- survival stage: When revenues start to grow and help pay some, but typically not all of the expenses.
- Rapid growth stage: period a very rapid revenue in cash flow growth
- Early maturity stage: . When the growth of revenue and cash flow continues, but at a much slower right thin in the rapid growth stage.

42
Q

Warrants

A

Financial instruments that give the holder the right to purchase a company stock at a specific price before a certain date

43
Q

E finance principal one

A
  • Real human and financial capital must be rented from owners
    - 2 factors determine the returns for these capitals.
    Time value
    Risk
  • expect to provide a return or the venture will not survive in market economy 
44
Q

E-finance principle two

A
  • Risk and expected reward go hand-in-hand
    Time value is not the only cost when using others funds
    More risk equals more expected reward
    How much more? market determined 
45
Q

E-finance principle three

A

While accounting is the language of business cash is the currency

46
Q

E-finance principle 4

A

Venture financing involves search, negotiation, and privacy 
-public financial markets: standard contracts trade on organized exchanges.
-Private financial markets: customized contracts bought in ink and infrequently sold and inefficient private negotiations 

47
Q

E finance principles five

A

A ventures financial objective is to increase value
- Many objectives, including personal ones
- But the unify financial objective is to increase value
- value derives from the ability to generate cash to pay capital providers for their capital

48
Q

E finance principal six

A

It is dangerous to assume that people act against their own self interest
- aligning incentives, investors, founders, employees, spouses, etc. is critical
- Incentives diverge and renegotiation is important
- owner manager conflicts: differences between a managers, self interest, and that of the owners who hired him or her
- owner - debt holder agency conflict: divergence of the owners and the lenders self interest as the firm gets close to bankruptcy. 

49
Q

E finance principal seven

A

Venture character and reputation can be assets or liabilities
- Ventures of character that can be different from the individuals who founded or managed it
- Entrepreneurs state that ethical standards are one of the ventures, most important assets and our critical to long-term success and value
- Ventures and make society contributions
- many successful entrepreneurs are financially and personally involved in charitable endeavors 

50
Q

Venture financing

A

FIN 470 (9 decks)

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