Functioning of capital markets: Theoretical foundation (4 basic assumptions) of the corporate finance theory is traditionally most likely…? (________ finance theory)
What are the 4 mainly focused results from those basic assumptions?
4: Division of financing instruments can be made at the company’s own discretion (Aufteilung auf verschiedene Finanzinstrumente erfolgt nach eigenem Ermessen)
Having discussed the theoretical foundation of modern market theory, what do we discuss further in the context of EF, especially differently to the theory? Name the 4 results mainly focused and highlight the 2 differences!
What ist the name of the economic theory and what are the divergent assumptions to the neo-classical finance theory?
How can EF most realistically be analysed? Which relations are the reasons for this?
Entrepreneurial Finance can be analyzed most realistically using the ___________ due to the special consideration of ___________
Entrepreneurial Finance can be analyzed most realistically using the Principal-Agency Theory due to the special consideration of client/contractor or doctor/patient relation
Principal-Agency Theory: What are the three categories given?
What key essentials come with each category?
Principal = Investor
Agent = Entrepreneur
Illustration: How does a typical financing development look? (Focus on Loss and Time)
SAP is an example for growth without external funding and finance. How did they manage not to raise any funds?
The first three years they were doing software consultancy and created the software for clients which they later on used to scale up. By selling the written code they managed to grow to nowadays extend. A scenario without the counsulting backstory would have been to finance the first three loss-Intensiv years and afterwards being able to scale the business in the same way.
Raising the question of how much capital is required. Ist there an exact answer to it? What is the determining conflict?
Start-ups define their financing strategy based on the __________.
Describe the business strategy that is based on milestones.
What is crucial to reduce the perceived risk of investors in a specific Investment? Give some examples! Start-ups define their financing strategy based on the capital required: What is crucial to reduce the perceived risk of investors in a specific Investment? Give some examples!
Describe the risk/return trade-off of Finance graphically! Which trade off is described by the risk/return equilibrium?
Financing in companies: What is the main decision to choose between? (2 categories with 2 types each)
Furthermore what are the 5 possibilities do companies have?
Redeployment = Umschichtung
Depreciation = Abschreibung
Disposal = Entsorgung
First differentiation in equity financing: From which 2 categories can you get funding? Solve graphically!
How do the options perform with regard to “Capital gains / support” and “Dividends” from an investor’s perspective?
Having already spoken about the first differentiation for equity finance: When we draw attention to the early phase equity financing, how can we divide this (2 ways) and what further possibilities come with this differentiation(2 and 4 ways) ? Solve graphically!
Example (here it is Facebook) for divergent interests between founder, early employee and investor. What can all acteuers possibly want the most?
Investor-Founder relationship: There are two separations for investors and founders which will lead to dilemma faced by the founders (The solution is given as a table)
Investor-founder relationships can be complex due to the separation of __________ and __________
Rich or King: Describe the two factors for the Tradeoff! Name all 4 categories! Solve graphically!
5 steps of the Framework of financing decisions and its financing requirements!
Generally speaking how many different types of financing options are there? Name all of them
Can also be customer money
What quantity of money can each investor provide (roughly)? In what stage might which quantity be needed? How is the risk of capital developing over the different stages of a new venture? Differentiate between equity capital and risk capital!
What are typically other supportive factors for new venture to gain from investors? Mentioned are additional supports for the stages Seed, Start-Up, Ealry-Growth and Exit.
Generally speaking why is a banking loan not suited for new venture financing?
What is the perspective of the entrepreneur and what’s the one of the bank (core idea sufficient)?
How do banks determine whether to grant a creditline or not: Who is leading negotiations? What are relevant documents for the communication? What are the determining criteria for a credit decision? (4 rating criteria discussed)
Deep-Dive into the 4 determining credit conditions criteria: Explain each criteria! What is the result of the criteria valuation? (name of the factor)
Now specifically for opening up a local bar: Who should you contact to expand your working capital? What can be benefitial for the working relationship? (3 benefits)
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