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MNGT 305 Final Study Guide

MNGT 305 Final Study Guide - STUDY GUIDE MNGT 305 SPRING...

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STUDY GUIDE, MNGT 305 SPRING 2010 CHAPTERS 10-15 1. List & describe 3 reasons why new ventures need funding. a. Cash Flow Challenges. Inventory must be purchased, employees trained and paid, and advertising must be paid for before sales generate cash b. Capital Investments - The cost of buying real estate, building facilities & equipment typically exceeds a firm’s ability to provide funds for these needs on its own. c. Lengthy Product Development Cycles – the upfront costs of product development often exceeds a firm’s ability to fund these activities on its own. 2. List 3 sources of personal financing for new ventures. a. Founders themselves - personal savings, mortgages, credit cards, etc b. Friends and family – gifts, loans or investments (also, delayed compensation or reduced or free rent) c. Bootstrapping - the use of creativity, ingenuity, and any means possible to obtain resources other than borrowing money or raising capital from traditional sources. 3. List 3 sources of equity financing for new ventures. a. Business Angels - individuals who invest their personal capital in startups b. Venture Capital - money is invested by venture-capital firms--limited partnerships of money managers--in start-ups and small businesses with exceptional growth potential. c. Initial Public Offering - the first sale of stock by a firm to the public 4. List 2 sources of debt financing for new ventures. a. Commercial Banks – generally somewhat reluctant to lend to start-ups b. SBA Guaranteed Loans - while these loans typically aren’t available to startups, they are an important source of funding for small businesses in general. 5. Briefly discuss two advantages AND two disadvantages of equity financing (4 total). Two advantages: a. Quick influx of capital into business. b. Use their money/resources to get the company moving (projects, construction, etc) Two disadvantages: a. Need to have an exit strategy for the venture capitals – they want to get in and get out and not stay long term. b. Most of the proposals are rejected cause they are looking for that “home run” investment. Note: you give up present / future revenue to pay them back. 6. List three of the four objectives of market segmentation. a. Identify one or more relatively homogeneous groups of prospective buyers b. Differences within the segment should be small c. The segment should be distinct enough so that its members can be easily i.d. d. Possible to determine the size of the segment so that a firm knows how large its potential market is 7. List three circumstances identified in the text that must be present in order for an entrepreneur to charge a premium price. a. Demand for the product is strong relative to supply; b. Demand for the product is inelastic; c. The product is patent protected and has a clearly defined target market; d. The product offers additional features that are valued;
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e. A new technology is being introduced; f. The product is positioned as a luxury product.
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