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Questions and Answers
What is considered the lifeblood of business?
What is considered the lifeblood of business?
Which of the following is NOT a reason firms need finance?
Which of the following is NOT a reason firms need finance?
Why do new businesses have difficulty raising finance?
Why do new businesses have difficulty raising finance?
What is essential for entrepreneurs to secure funding in the current era?
What is essential for entrepreneurs to secure funding in the current era?
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Which of the following represents a potential risk that lenders consider with start-up businesses?
Which of the following represents a potential risk that lenders consider with start-up businesses?
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What is implied about funding in the new era?
What is implied about funding in the new era?
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What do current funding practices discourage?
What do current funding practices discourage?
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What is suggested about start-up capital requirements?
What is suggested about start-up capital requirements?
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What type of capital is used to purchase fixed assets?
What type of capital is used to purchase fixed assets?
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Which capital is primarily required for daily operations of a business?
Which capital is primarily required for daily operations of a business?
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When is Growth Capital needed?
When is Growth Capital needed?
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Which of the following would be considered a startup expense?
Which of the following would be considered a startup expense?
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What kind of expenses are incurred before a business begins operations?
What kind of expenses are incurred before a business begins operations?
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Which of the following expenses cannot be depreciated over time?
Which of the following expenses cannot be depreciated over time?
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If you paid for a logo before your business officially opens, how is this classified?
If you paid for a logo before your business officially opens, how is this classified?
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What type of payment for pre-opening employees is categorized as a startup expense?
What type of payment for pre-opening employees is categorized as a startup expense?
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Which type of capital refers to a person's talents and capabilities that contribute to production?
Which type of capital refers to a person's talents and capabilities that contribute to production?
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What is a characteristic of natural capital?
What is a characteristic of natural capital?
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Which of the following is NOT one of the five forms of entrepreneurial capital?
Which of the following is NOT one of the five forms of entrepreneurial capital?
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What do we call the connections within and between social networks?
What do we call the connections within and between social networks?
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Which of the following best defines debt financing?
Which of the following best defines debt financing?
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What is an advantage of equity financing?
What is an advantage of equity financing?
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Which type of capital includes physical assets like tools and factories?
Which type of capital includes physical assets like tools and factories?
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Which is a primary source of financing for entrepreneurial ventures in the Philippines?
Which is a primary source of financing for entrepreneurial ventures in the Philippines?
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Which of the following is an advantage of bootstrapping for entrepreneurs?
Which of the following is an advantage of bootstrapping for entrepreneurs?
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What is one common strategy bootstrapping entrepreneurs use to manage cash flow?
What is one common strategy bootstrapping entrepreneurs use to manage cash flow?
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Which of the following is a disadvantage of bootstrapping?
Which of the following is a disadvantage of bootstrapping?
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Which statement best describes the approach of bootstrapping in terms of product development?
Which statement best describes the approach of bootstrapping in terms of product development?
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How does bootstrapping affect the growth of a company compared to conventional funding?
How does bootstrapping affect the growth of a company compared to conventional funding?
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What is a potential risk of bootstrapping related to finances?
What is a potential risk of bootstrapping related to finances?
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What aspect do bootstrapping entrepreneurs focus on more than traditional methods?
What aspect do bootstrapping entrepreneurs focus on more than traditional methods?
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What is the 'kitchen table pitch' commonly associated with in startup culture?
What is the 'kitchen table pitch' commonly associated with in startup culture?
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What is one reason that debt may be considered better than equity for relatives?
What is one reason that debt may be considered better than equity for relatives?
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Which group is NOT considered part of the 4Fs of informal investing?
Which group is NOT considered part of the 4Fs of informal investing?
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What is a typical expectation when normalizing expected returns among investors?
What is a typical expectation when normalizing expected returns among investors?
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What type of support is NOT usually provided by venture capitalists?
What type of support is NOT usually provided by venture capitalists?
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What defines angel investors in the context of business investment?
What defines angel investors in the context of business investment?
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Which of the following factors influence return expectations from informal investors?
Which of the following factors influence return expectations from informal investors?
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Which statement best describes the profile of an angel investor?
Which statement best describes the profile of an angel investor?
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What is the primary advantage that angel investors offer to startups beyond financial backing?
What is the primary advantage that angel investors offer to startups beyond financial backing?
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Study Notes
Entrepreneurial Capital
- There are five types of entrepreneurial capital: Financial, Manufactured, Human, Social, and Natural
- Human Capital encompasses talents and capabilities that individuals contribute to the production process
- Financial Capital includes cash and money, while Manufactured Capital comprises manufacturing plants and other physical assets
- Social Capital refers to connections within and between social networks, as well as connections among individuals
- Manufactured Capital includes physical means of production, such as tools, clothing, shelter, and factories
- Natural Capital represents natural ecosystems that provide resources for the future, acknowledging the Earth's valuable resources and their connection to the business environment
Funding for Entrepreneurial Ventures
- Businesses need funding for startup costs, ongoing operations, and expansion
- Startups often face difficulty securing funding due to limited customer base, competition, and risk of failure
- Bootstrapping involves using personal resources to fund a business, minimizing dependence on external investors
- Informal investors often come from the "4Fs": Friends, family, founders, and foolhardy investors
- Venture Capitalists provide capital to young businesses in exchange for equity ownership
- Angel Investors are high-net-worth individuals who provide capital to startups in exchange for equity ownership or convertible debt
- Angel Investors offer not only financial resources, but also valuable guidance, industry expertise, and networking opportunities
Bootstrapping Advantages and Disadvantages:
- Advantages: No time wasted on investment hunting, full control over the company, not answerable to investors, quick management of money, creative problem-solving, focus on customers, efficient product development and marketing
- Disadvantages: May not be practical for manufacturing or importing, can take longer to grow the company, potential for limited earnings in the initial stages, increased risk of debt
- Bootstrapping can lead to a strong, lean, efficient, customer-focused company
Financial Funds - Estimating Startup Expenses
- Startup expenses are one-time costs incurred before beginning operations. These include expenses like legal fees, logo design, initial website design, insurance, and payroll.
- Bootstrapping entrepreneurs can implement strategies like negotiating longer payment terms with suppliers, asking customers to pay in advance, or selling accounts receivable to an agent for a fee.
Financing from Family
- Family financing can be a viable source of capital for entrepreneurs
- Consider factors like motivation, debt vs. equity, formalization of agreements, and avoiding voting stock when dealing with family financing.
Informal Investing
- Informal investors often come from the 4Fs: friends, family, founders, and "foolhardy investors."
- Expected returns from informal investors vary based on factors such as altruism, relationships (e.g., strangers vs. family), gender, age, and entrepreneurial experience.
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Description
Test your knowledge on the various types of entrepreneurial capital including financial, manufactured, human, social, and natural capital. Additionally, explore the funding aspects required for startups and ongoing business operations. This quiz covers essential concepts for aspiring entrepreneurs and business students.
