Faculty of Administrative and Monetary Sciences
Project 3
Deadline: 28/11/2020 @ 23:59
| Course Identify: Entrepreneurship and Small Enterprise | Pupil’s Identify: Lobna Alshabanah |
| Course Code: – MGT 402 | Pupil’s ID Quantity: 160114562 |
| Semester: I | CRN: |
| Educational 12 months: 1440/1441 H |
For Teacher’s Use solely
| Teacher’s Identify: Dr. Vinay Nagu | |
| College students’ Grade: Marks Obtained/Out of | Stage of Marks: Excessive/Center/Low |
Directions – PLEASE READ THEM CAREFULLY
- The Project have to be submitted on Blackboard (WORD format solely) by way of allotted folder.
- Assignments submitted by means of e mail is not going to be accepted.
- College students are suggested to make their work clear and properly introduced, marks could also be lowered for poor presentation. This consists of filling your info on the quilt web page.
- College students should point out question quantity clearly of their reply.
- Late submission will NOT be accepted.
- Keep away from plagiarism, the work must be in your personal phrases, copying from college students or different sources with out correct referencing will end in ZERO marks. No exceptions.
- All answered have to be typed utilizing Instances New Roman (measurement 12, double-spaced) font. No footage containing textual content will likely be accepted and will likely be thought of plagiarism).
- Submissions with out this cowl web page will NOT be accepted.
Division of Enterprise Administration
Entrepreneurship and Small Enterprise – MGT 402
Marks: 5
Course Studying Outcomes:
- Show a stable understanding of the potential of entrepreneur in at the moment’s aggressive enterprise world. (Lo 1.2).
- Design a stable projected monetary Plan and conduct a breakeven Assessment for a small firm. (Lo 2.5).
- Show a radical understanding concerning the significance of money administration for the success of a small enterprise. (Lo 2.eight).
Project – 3
College students are alleged to learn the Case 2- Ready Planet from the textbook, web page quantity:812
“How can a small firm discover capital to finance an progressive new product?”
Textbook: (Scarborough, N.M. & Cornwall, J. (2012). Efficient small enterprise administration: An Entrepreneurial strategy (10th ed.). Higher Saddle River, NJ: Prentice Corridor.
Primarily based in your understanding of the case and ideas, reply the next question in 200-350 phrases every.
Project Questions:
1. Consultants say that entrepreneurs who want between $100,000 and $3 million usually face the best obstacles when elevating capital for his or her companies. Why? (1.5 marks)
2. How ought to Kevin Semcken increase the $1.5 million in capital that Ready Planet wants? You should definitely contemplate sources of each debt and fairness financing. (1.5 marks)
3. Write a brief memo to Kevin Semcken explaining what he ought to do earlier than he approaches potential lenders and buyers to maximise his possibilities of getting the capital that Ready Planet wants. (2 marks)
Reply:
Question 1
Companies within the capital of between $100,000 and $1,000,000 are small and medium enterprises. One of the classes of companies that will fall into this class are start-ups. Begin-ups are high-risk ventures with no assured fee of return. Traders and lenders are conscious of the danger of loaning funds to such enterprises and are more likely to flip the requests down as a result of the returns are barely commensurate with the danger concerned.
The shortage of collateral for companies on this class can also be a barrier to securing funds. Most lenders want collateral as safety in opposition to borrowed funds. The collateral serves as a assure that in case of any eventuality, the lender can get hold of their funds. Sadly, companies which may be concerned about $100,000 to $1,000,000 loans barely have any collateral to safe their loans. Any lender that consents to offer a mortgage with out collateral dangers shedding all of the funds superior to the borrower with none risk of recovering.
A enterprise may purchase a mortgage with out collateral utilizing its historic monetary efficiency and product portfolio. For instance, if an entrepreneur has achieved a year-on-year excellent monetary efficiency over a substantial length, for instance, 5 years, equivalent to a optimistic money move, a considerable web earnings, and low price of gross sales, they might use this file to safe a mortgage. The monetary statements are a testomony that the entrepreneur has a rising marketplace for their merchandise. Sadly, as highlighted herein, entrepreneurs who could also be concerned about $100,000 to $3,000,000 capital barely have any monetary efficiency price contemplating. Subsequently, they can’t leverage their historic monetary efficiency to safe a low, making it all of the tougher.
Question 2
From the case study, Ready Planet has carved a distinct segment for its merchandise, which has been rising by the day, due to its Linx headphones. The corporate has attracted curiosity from an honest following, which has enabled it to gross $2 million in income. Ready Planet ought to leverage its present and potential prospects for funding by means of crowdfunding. In line with Mollick (2014), crowdfunding permits an entrepreneur to boost capital from the general public in return for future merchandise. Ready Planets has already created a repute for its merchandise; due to this fact, convincing its followers to contribute to extra progressive and superior merchandise wouldn’t be a problem.
Alternatively, Semcken ought to contemplate discovering an angel investor. In line with Tiftik and Zincirkiran (2014), an angel investor gives greater than monetary Help to a enterprise. In addition they supply social, technological, and bodily Help to the entrepreneur to facilitate conducting the aim (Tiftik and Zincirkiran, 2014). The investor additionally participates in managerial duties, affords Help in gross sales and advertising, recruitment, and different vital tasks essential for its operation. Semcken can increase the required $1.5 million by means of an angel investor.
Question 3
Each lender’s principal concern is the potential of buying again the mortgage superior and any relevant curiosity. Subsequently, each potential lender have to be satisfied past doubt which you can repay the $1.5 million in keeping with the phrases of your settlement. One of the steps is to arrange an intensive marketing strategy. The plan ought to entail an Assessment of each present and conceptualized merchandise and the way far these are within the improvement lifecycle.
The second step is to arrange correct, dependable monetary statements for the corporate. The statements ought to precisely symbolize Ready Planet’s monetary efficiency. If attainable, they need to be audited to determine their accuracy. Any critical lender needs to know their sources should not wasted on an organization on life Help. Alongside the monetary statements, a projection of the corporate’s web earnings, profitability, and liquidity would additionally go a good distance in convincing potential lenders in regards to the viability of the corporate.
Lenders are additionally concerned about understanding how the borrower intends to make use of the capital and the way that plan will generate income to repay the debt. A complete mortgage Assessment highlighting the meant use of the mortgage quantity accounting for each greenback may also go a good distance in convincing potential lenders that the Ready Planet is a worthy funding.
References
(Scarborough, N.M. & Cornwall, J. (2012). Efficient small enterprise administration: An Entrepreneurial strategy (10th ed.). Higher Saddle River, NJ: Prentice Corridor.
Mollick, E. (2014). The dynamics of crowdfunding: An exploratory study. Journal of Enterprise Venturing, 29(1), 1-16. doi: 10.1016/j.jbusvent.2013.06.005
Tiftik, H., & Zincirkıran, M. (2014). “Angel Traders” in Entrepreneurship: An Assessment on Turkey Mannequin. Journal of Enterprise Analysis – Turk, 6(1), 42-42. doi: 10.20491/isader.2014115962
