Prior to beginning work on this discussion forum, read Unit 3: Securing Capital from the course textbook Entrepreneurship: Starting and Operating a Small Business. Frame your reading with the view that obtaining financing for a new business depends on a mix of personal and business factors. For example, people uncomfortable with debt are likely to prefer equity financing rather than debt financing. Of course, personal preferences are affected by business factors. For example, those offering equity funding do not fund all business offerings and debt, or bootstrapping might be the only options available.
Review the funding sources listed in Exhibit 10-3 in the course textbook Entrepreneurship: Starting and Operating a Small Business. Assess your personal feelings about independent funding, debt funding, and equity funding. Select one source of funding sources listed in Exhibit 10-3 and then do the following:
- Justify your choice in terms of your personal feelings about sources of funding.
- Critique the responses offered by two colleagues and offer at least one business condition that will affect the colleagues access to the preferred choice of funding. For example, if a colleague prefers debt financing from a bank, what is at least one business factor affecting the banks approval or denial of the loan your colleague must consider?
Offer a link to a video or an article that offers information about your preferred source of funding with an emphasis on the risks and rewards associated with the funding source. Think beyond the text. For example, offering friends and family an equity interest in a new business instead of debt has implications if the business fails. If bankruptcy occurs and assets are liquidated, creditors receive payment ahead of shareholders. How does this information affect your views about seeking funding assistance from friends and family?
Prior to beginning work on this discussion forum, read Unit 3: Securing Capital from the course textbook Entrepreneurship: Starting and Operating a Small Business. Frame your reading with the view that financial considerations frame all significant entrepreneurial activities and decisions, and the balance sheet is a rich source of information needed to inform significant business decisions and identify significant risks.
We can analyze a balance sheet to determine how a business is financed, and this analysis enables us to draw conclusions about risks we have because of the capital structure developed from choices about debt and equity financing.
Analyze the spreadsheet Balance Sheet Download Balance Sheetand create an initial discussion post that addresses the following:
- What conclusions about how the business is financed can be drawn from the composition of the organizations capital?
- Based upon the defined capital structure, assess the risks facing the entrepreneur responsible for this business because of the capital structure.
- What can one conclude about the businesss financing based on the composition of the organizations capital?
To aid your analysis of capital structure, access the balance sheet for this discussion, and compute the debt to equity ratio as follows:
- Add (current portion of long-term debt) + (long-term debt net of current portion) to obtain long-term debt.
- Debt-to-equity ratio = Long-term debt/total shareholders equity.
- Use the computed ratio to respond to the above questions.
Offer a link to a video or an article that supports your analysis and conclusions.