Entrepreneurial finance concepts and cases

373 Pages·2021·38.47 MB·English

by  Gina Vega, Miranda S. Lam

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Entrepreneurial Finance

An accessible guide to an increasingly complex subject, Entrepreneurial Finance:
Concepts and Cases demonstrates how to address often- overlooked financial
issues from the entrepreneur’s standpoint, including challenges faced by start-
ups and small businesses.
This new edition retains the original’s structure, around seven modules or
building blocks designed to be taught across a full semester with natural break
points built into each chapter within the modules. The building blocks present
macro- concepts which are explored in greater detail in each of the chapters.
Each concept is illustrated by a short case and followed by thoughtful questions
to enhance learning. The cases are new or fully updated for the second edition,
and deal with real companies, real problems, and currently unfolding issues.
A new chapter on business models includes coverage of social ventures, and the
chapters on forms of business ownership and financing have been expanded.
Upper- level undergraduate students of entrepreneurship will appreciate the
book’s practical approach and engaging tone, along with the hands- on cases and
exercises that help students to break down complex concepts.
Online resources for instructors include a case teaching manual, lecture slides,
test bank, and interactive exercises.
Miranda S. Lam is a Professor of Accounting and Finance at the Bertolon School
of Business, Salem State University, Massachusetts, USA, where she teaches
entrepreneurial finance, investments, and financial institutions with an emphasis
on integrating technology and experiential learning. Her research includes case
studies and investment decision models for individual investors.
Gina Vega is retired Professor of Management and owner of Organizational
Ergonomics, an academic consulting firm. She has published numerous cases
and written seven books, including The Case Writing Workbook: A Self-G uided
Workshop, second edition (Routledge, 2017). Gina is the Editor-i n- Chief of a
leading international online journal that publishes concise instructional cases
with expanded teaching notes in both English and Spanish.
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Entrepreneurial Finance

Concepts and Cases
Second edition
Miranda S. Lam and Gina Vega
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Second edition published 2021
by Routledge
52 Vanderbilt Avenue, New York, NY 10017
and by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2021 Taylor & Francis
The right of Miranda S. Lam and Gina Vega to be identified as authors of
this work has been asserted by them in accordance with sections 77 and 78
of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilised
in any form or by any electronic, mechanical, or other means, now known or
hereafter invented, including photocopying and recording, or in any information
storage or retrieval system, without permission in writing from the publishers.
Trademark notice: Product or corporate names may be trademarks or registered trademarks,
and are used only for identification and explanation without intent to infringe.
First edition published by Routledge 2015
Library of Congress Cataloging-i n- Publication Data
Names: Lam, Miranda S., author. | Vega, Gina, author.
Title: Entrepreneurial finance: concepts and
cases / Miranda S. Lam and Gina Vega.
Description: Second Edition. | New York : Routledge, 2021. |
Revised edition of the authors’ Entrepreneurial finance, 2016. |
Includes bibliographical references and index.
Identifiers: LCCN 2020021214 | ISBN 9780367343309 (hardback) |
ISBN 9780367343316 (paperback) | ISBN 9780429325045(ebook)
Subjects: LCSH: Small business–Finance. Classification:
LCC HG4027.7 .V44 2021 | DDC 658.15/92–dc23
LC record available at https://lccn.loc.gov/2020021214
ISBN: 978- 0- 367- 34330- 9 (hbk)
ISBN: 978- 0- 367- 34331- 6 (pbk)
ISBN: 978- 0- 429- 32504- 5 (ebk)
Typeset in Times New Roman
by Newgen Publishing UK
Visit the eResources: www.routledge.com/ 9780367343316
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Contents

Case Contributors viii

Foreword xii

Preface xv

MODULE 1
Getting Started with Cases 1

1 Case Preparation and Analysis for Students 3

Appendix 1.1 9
Appendix 1.2 10
Appendix 1.3 12
Appendix 1.4 13
Appendix 1.5 15
MODULE 2
Getting Money and Getting Going 17

2 Forms of Business Organization 19

Case Study 2.1 32
Case Study 2.2 34
3 Starting a New Venture 37

Case Study 3.1 48
Case Study 3.2 53
4 Financing a Business 59

Case Study 4.1 88
Case Study 4.2 90
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vi Contents
MODULE 3
Measuring Performance in the Short Term 93

5 Financial Statements and Analysis 95

Appendix 5.1 124
Appendix 5.2 125
Appendix 5.3 127
Case Study 5.1 129
6 Cash and Working Capital Management 139

Case Study 6.1 162
Case Study 6.2 164
MODULE 4
The Mechanics of Finance 167

7 Forecasting Cash Flows 169

Case Study 7.1 193
8 Pro Forma Financial Statements 196

Case Study 8.1 232
Case Study 8.2 235
MODULE 5
Measuring Performance in the Long Term 241

9 Capital Budgeting and Costs of Capital 243

Appendix 9.1 268
Case Study 9.1 270
Case Study 9.2 273
10 Business Valuation 277

Case Study 10.1 295
Case Study 10.2 297
MODULE 6
Exit Strategies 303

11 Exit and Harvest 305

Case Study 11.1 321
Case Study 11.2 322
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Contents vii
MODULE 7
A Winning Approach 329

12 How to Win Business Plan Competitions 331

Glossary 343

Index 349
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Case Contributors

Frederic Aiello is an Associate Professor of Business at the University of
Southern Maine (USM), a research associate with its Center for Business
and Economic Research and a management consultant focusing on the devel-
opment of strategy and organizational capacity in entrepreneurial small
businesses. He was a co-f ounder of the USM Business Plan Competition, the
Director of the USM Small Business Institute, a certified business counselor
with the Maine Small Business Development Center, and a leader in the cre-
ation of the USM Center for Entrepreneurship and Small Business. He has
taught Managing Organizational Behavior and Entrepreneurship at USM for
31 years.
Christine P. Andrews, DBA, is an associate professor of accounting at Salem
State University in Massachusetts. Prior to teaching, she worked as a CPA for
11 years in New York State. Her research focuses on financial reporting issues,
environmental contingency reporting, as well as pedagogical issues. Her pri-
mary teaching area is financial accounting, accounting information systems,
and managerial accounting.
Richard H. Borgman, PhD is Professor of Finance at the University of Maine.
Prior, he was a project manager for Dominion Bankshares Corporation
and General Manager and Book Buyer for Printer’s Ink Bookstores. He
has a Master’s degree in English. Dr. Borgman has published in Financial
Decisions, Journal of Business and Economic Perspectives, Journal of Financial
Education, Journal of Behavioral Finance, The Case Journal, Journal of
Business and Economic Studies, Commercial Lending Review, Credit and
Financial Management Review, and Journal of Financial Services Marketing,
among others. He teaches courses in corporate finance, international finance,
and financial institutions.
Lisa Chen, PhD is an Associate Professor in the Accounting and Finance
Department at the Bertolon School of Business, Salem State University. Her
research focuses on financial accounting and financial accounting software
usage in business and non- profit entities. Professor Chen has published in
numerous journals and received several awards for research papers.
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Case Contributors ix
Douglas Chene, PhD, CPA is Chairperson and Associate Professor in the
Accounting and Finance Department at the Bertolon School of Business,
Salem State University. His research focuses on tax strategy and compliance
including non- profit organization issues such as unrelated business income
tax and the disposition of restricted assets when non- profit organizations
reorganize. He is beginning a project on tax strategy for cannabis businesses.
Professor Chene has published in numerous journals including the Journal of
Taxation and Accounting Forum. He has been a Certified Public Accountant
since 1994.
Edward Desmarais, DBA is retired Professor of Management at the Bertolon
School of Business, Salem State University. He has four published cases and
uses cases extensively in his teaching. His research interests include business
strategy and strategy implementation. He received awards for teaching and
writing.
Caroline Glackin, Assistant Professor in the Department of Management,
Marketing and Entrepreneurship of Fayetteville State University's
Broadwell College of Business and Economics, is the author of works
on access to microloan capital, the potential for behavioral economics
to inform an understanding of the borrowing process, and the role of
savings as a proxy for credit history. She has co- authored research on
entrepreneurial finance courses and the range of pedagogies employed
in entrepreneurial finance education. Dr. Glackin has co- authored texts
with Network for Teaching Entrepreneurship founder Steve Mariotti
entitled Entrepreneurship, 3e and Entrepreneurship and Small Business
Management, 2e.
Karen Hallows, PhD is a lecturer in the finance department at the Robert
H. Smith School of Business, University of Maryland. She currently teaches
business finance in the undergraduate program. Her current research focuses
on case writing in finance. Prior to joining the Smith School, Karen was
the director of the executive MBA program and finance faculty member at
George Mason University (GMU) from 1998– 2011. In 2009, she was awarded
one of six GMU University-w ide Teaching Excellence Awards. Karen has led
many short- term study abroad courses around the world and has conducted
finance executive education seminars.
Bill Hamilton is the Entrepreneur in Residence in the Hull College of Business
and an Assistant Professor of Neurology in the Medical College of Georgia
at Georgia Regents University. He received a B.A. in History/E conomics
from Emory University and a Masters in Business Administration and
Health Administration from Georgia State University. Bill is a founder of
REACH Health, Inc., which provides a clinical interface for the treatment
of acute stroke via a web-b ased telemedicine system. While at REACH he
filled many roles, including Executive Vice President, Interim President/ CEO,
Chief Operating Officer, and Key Account Manager.