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Entrepreneurial Finance: Fundamentals of Financial Planning and Management for Small Business

Entrepreneurial Finance: Fundamentals of Financial Planning and Management for Small Business

M. J. Alhabeeb

ISBN: 978-1-118-69148-9

Apr 2015

480 pages

$134.00

Description

Featuring key topics within finance, small business management, and entrepreneurship to develop and maintain prosperous business ventures

With a comprehensive and organized approach to fundamental financial theories, tools, and management techniques, Entrepreneurial Finance: Fundamentals of Financial Planning and Management for Small Business equips readers with the necessary fundamental knowledge and advanced skills to succeed in small firm and business settings. With a unique combination of topics from finance, small business management, and entrepreneurship, the book prepares readers for the challenges of today’s economy.

Entrepreneurial Finance: Fundamentals of Financial Planning and Management for Small Business begins with key concepts of small business management and entrepreneurship, including management tools and techniques needed to establish, run, and lead business ventures. The book then delves into how small businesses are operated, managed, and controlled. General finance skills and methods are integrated throughout, and the book also features:

  • Numerous practical examples and scenarios that provide a real-world perspective on entrepreneurship and small business management
  • A brief summary, list of key concepts, and ten discussion questions at the end of each chapter to prepare readers for the challenges of today's economy
  • A practical guide to the complete life of a small business, from establishing a new venture to training and developing young entrepreneurs tasked with maintaining and developing a prosperous economy
  • An in-depth discussion of the entire process of writing a successful business plan, including the rationale, significance, and requirements
  • Techniques needed to solidify the free enterprise tradition, develop entrepreneurial strategies, and grow small businesses

Entrepreneurial Finance: Fundamentals of Financial Planning and Management for Small Business
is an ideal textbook for upper-undergraduate and first-year graduate courses in entrepreneurial finance within business, economics, management science, and public administration departments. The book is also useful for MBA-level courses as well as for business and management PhD majors as a resource in methodology. The book is also an idea reference for entrepreneurs, business managers, market analysts, and decision makers who require information about the theoretical and quantitative aspects of entrepreneurial finance.

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PREFACE xvii

PART I ENTREPRENEURIAL PERSPECTIVE

CHAPTER 1 SMALL BUSINESS AND THE ENTREPRENEUR 3

1.1 What is Entrepreneurial Finance? 3

1.2 Significance of the Small Business 5

1.3 Entrepreneurship and the Entrepreneur 9

1.4 The Idea and the Opportunity 12

1.5 From an Idea to Reality 16

1.6 Summary 18

Key Concepts 18

Discussion Questions 19

CHAPTER 2 SMALL BUSINESS OPTIONS 20

2.1 Starting a New Business 20

2.2 Buying an Existing Business 22

2.3 Purchase Options 24

2.4 Franchise 26

2.5 Home Business and Family Business 30

2.6 Summary 34

Key Concepts 34

Discussion Questions 34

CHAPTER 3 SMALL BUSINESS PURCHASE PRICE 36

3.1 Asset-Based Value 36

3.2 Cash Flow–Based Value 39

3.3 Market-Based Value 40

3.4 Capitalized Earnings–Based Value 41

3.5 Financial Ratios–Based Value 43

3.6 Summary 44

Key Concepts 45

Discussion Questions 45

PART II ENTREPRENEURIAL ORGANIZATION

CHAPTER 4 FORMS OF BUSINESS OWNERSHIP 49

4.1 Sole Proprietorship 49

4.2 Partnership 50

4.3 Corporation 54

4.4 Other Forms of Business Ownership 58

4.5 Summary 62

Key Concepts 62

Discussion Questions 63

CHAPTER 5 THE BUSINESS PLAN 64

5.1 What is a Business Plan? 64

5.2 Contents of the Plan 66

5.3 Other Elements of the Plan 76

5.4 Reviewing the Plan 79

5.5 Anticipating and Preparing Responses to Potential Risks 82

5.6 Financing the Plan 83

5.7 Presenting the Plan 84

5.8 Updating the Plan 86

5.9 Grooming the Plan 86

5.10 Summary 88

Key Concepts 88

Discussion Questions 89

PART III ENTREPRENEURIAL FINANCE AND VALUATION

CHAPTER 6 FINANCIAL STATEMENTS AND THEIR ANALYSIS 93

6.1 The Balance Sheet 93

6.2 Income–Expenses Statement 97

6.3 Financial Statement Analysis 99

6.4 Ratio Analysis 102

6.5 The DuPont Model 115

6.6 Summary 117

Key Concepts 118

Discussion Questions 118

CHAPTER 7 CAPITAL STRUCTURE AND LEVERAGE 120

7.1 Debt and Equity Capital 120

7.2 The Optimal Capital Structure 125

7.3 Leverage 133

7.4 Summary 145

Key Concepts 146

Discussion Questions 146

CHAPTER 8 PROFIT AND THE COST–VOLUME ANALYSIS 148

8.1 Profit Concept Between Economics and Accounting 148

8.2 Profit Margin and Markup 149

8.3 Profit and Cash Flow 152

8.4 Profitability and Earning Power 154

8.5 When Would a Firm Start Collecting Profits? 156

8.6 Break-Even Quantity and Break-Even Revenue 158

8.7 Break-Even Graphics 162

8.8 Desired Profit and the Break-Even Point 164

8.9 Non-Cash Charges and the Break-Even Point 166

8.10 Profit Planning 168

8.11 Summary 169

Key Concepts 170

Discussion Questions 170

CHAPTER 9 PRO FORMA STATEMENT AND FINANCIAL FORECASTING 172

9.1 Basic Pro Forma Statements 173

9.2 Pro Forma and the Sales Ratio 176

9.3 Change in Sales (ΔS) and the Needed Fund 178

9.4 Role of Financial Forecasting 179

9.5 Basic Steps of Forecasting 180

9.6 Types of Forecasting Models 181

9.7 The Analysis of Time Series 184

9.8 Fitting the Model 185

9.9 Adjusting for Seasonality 189

9.10 The Smoothed Forecasts 197

9.11 Barometric Forecasting 204

9.12 Testing Forecasting Accuracy 206

9.13 Summary 212

Key Concepts 213

Discussion Questions 213

CHAPTER 10 WORKING CAPITAL 214

10.1 What is Working Capital? 214

10.2 Working Capital and Profit-Risk Manipulation 215

10.3 Working Capital and Financing Strategies 218

10.4 Summary 221

Key Concepts 221

Discussion Questions 221

CHAPTER 11 FINANCIAL MANAGEMENT OF WORKING CAPITAL 223

11.1 Cash Management 223

11.2 Marketable Securities Management 228

11.3 Account Receivable 229

11.4 Account Payable and Trade Discounts 238

11.5 Summary 241

Key Concepts 241

Discussion Questions 242

CHAPTER 12 INVENTORY MANAGEMENT AND CONTROL 243

12.1 What is Inventory? 243

12.2 Economic Order Quantity (EOQ) 245

12.3 The Reorder Point 255

12.4 JIT-Inventory System 260

12.5 Summary 260

Key Concepts 261

Discussion Questions 261

CHAPTER 13 INVESTMENT PROJECT EVALUATION AND RISK MANAGEMENT 263

13.1 Categories of Investment Purposes 264

13.2 Steps for Project Selection 265

13.3 Types of Projects 266

13.4 Patterns of Cash Flow 267

13.5 Project Evaluation Techniques 269

13.6 Risk and its Sources 287

13.7 Methods of Risk Management 288

13.8 Sensitivity Analysis, Scenario Analysis, and Simulation 297

13.9 Summary 300

Key Concepts 301

Discussion Questions 301

CHAPTER 14 BUSINESS VALUATION AND HARVESTING 303

14.1 What is Business Valuation? 303

14.2 Valuation Tools 304

14.3 Valuation Techniques 305

14.4 What is Business Harvesting? 311

14.5 Harvesting Strategies 312

14.6 Summary 317

Key Concepts 317

Discussion Questions 317

PART IV ENTREPRENEURIAL MANAGEMENT AND CONTROL

CHAPTER 15 BASIC ENTREPRENEURIAL MANAGEMENT 321

15.1 Planning 322

15.2 Organizing 324

15.3 Staffing 326

15.4 Directing 326

15.5 Controlling 329

15.6 Business Strategies 330

15.7 Summary 331

Key Concepts 332

Discussion Questions 332

CHAPTER 16 LOCATION AND LAYOUT 334

16.1 Factors Affecting the Selection of Location 335

16.2 Types of Business Outlets and Locations 337

16.3 Site Selection 341

16.4 Site Alternatives 347

16.5 Layout and Design 348

16.6 Summary 357

Key Concepts 357

Discussion Questions 358

CHAPTER 17 OPERATIONS, BUDGETING, AND TAXES 359

Operations 359

17.1 Material and Supplies: Buying or Making? 360

17.2 Product Quality 361

17.3 Budgetary Variance and Flexible Budgeting 364

17.4 Types of Budgets 365

17.5 Considerations for Budgetary Control 368

17.6 Types of Taxes 369

17.7 Taxes and Forms of Business Ownership 371

17.8 Considerations and Strategies 371

17.9 Summary 373

Key Concepts 374

Discussion Questions 374

CHAPTER 18 MARKETING, PROMOTION, AND DISTRIBUTION 375

18.1 Market and Customer 375

18.2 Marketing and Customer’s Decisions 378

18.3 Marketing Research 381

18.4 Product 383

18.5 Price 389

18.6 Place 393

18.7 Promotion 396

18.8 Summary 400

Key Concepts 400

Discussion Questions 401

CHAPTER 19 HUMAN RESOURCE MANAGEMENT 402

19.1 Job Analysis 402

19.2 Personnel Planning 404

19.3 Summary 419

Key Concepts 420

Discussion Questions 420

APPENDIX 421

GLOSSARY 427

FURTHER READING 439

INDEX 441