Economics of Enterprise Answers

36. What would be an investor’s equity ownership stake in a technology venture given the following information:

• Pre-money valuation: $1.2 million

• Investor share purchase: $300,000

• What is the post-money valuation of this venture?

37. Explain the main differences between debt and equity financing. How does a lender, such as a bank, control the operations of a technology venture to which it lends money?

38. If a technology venture has net profits of $2 million, in an industry where other firms like it have been acquired for amounts equivalent to four times net profit, what is the value of the venture?

31. Explain what is meant by the term “angel investor.” At what stage of development is the technology entrepreneur most likely to attract angel investors?

32. What does the average venture capitalist seek in the technology ventures they invest in?

33. What is the role of a private placement memorandum (PPM) in establishing and promoting a financing deal?

34. Explain how the U.S. Securities and Exchange Commission regulates investing in private technology ventures. What options are available to the technology entrepreneur to seek private equity financing?

35. How does investment in a private equity financing lead to dilution of a founder’s overall percentage of ownership?

26. How can a technology entrepreneur use a vesting schedule to motivate employees?

27. What are the responsibilities of a corporation’s board of directors? How can a technology entrepreneur ensure compliance with statutes governing the corporate entity?

28. Explain the difference between common and preferred stock. What are some potential features that can be added to preferred stock offerings?

29. Explain what it means for a new technology venture to be “overcapitalized.” What are the disadvantages of this?

30. Identify the type of investor who is most likely to invest in pre-start-up technology ventures. Explain how the technology entrepreneur should approach and work with these investors.

21. Define the significance of making a business a “limited liability entity.”

22. Who is responsible for the wrongful acts of a businesses employee? Under what circumstances would be employee be personally liable? Under what circumstances would the owners of the business be personally liable?

23. 5. How does an entrepreneur determine which form of entity to adopt for his or her business?

24. Under what circumstances is it most beneficial for a company to self-fund or obtain debt financing to reach a particular milestone?

25. Describe what is meant by the term “Employee Stock Option plan.” How can an entrepreneur use such a plan to build a new venture?

16. Name three different modes of entry for a technology venture that is contemplating entering a foreign market. What factors should the entrepreneur consider when making this decision?

17. Under what operating system would a technology venture establish standard operating procedures? Why would a venture need to develop such procedures?

18. What is meant by the term “business model”?

19. What are the risks of operating a business as a sole proprietorship?

20. What are the advantages associated with operating a technology venture as a limited liability company?

11. Explain why a “capital-intensive” industry can be difficult to enter for an entrepreneur. What might the entrepreneur do to overcome the entry barriers to a capital-intensive industry?

12. How can a technology company recruit and retain valued knowledge workers? Give an example of a company that excels in this regard. What does it do that makes it successful?

13. What are CEOs of global companies saying about the pace of change in the global economy? How can a technology venture deal with an accelerating pace of change?

14. How did Microsoft adjust its strategy in the Chinese market? What mistakes did it make in the early days in that market?

15. Explain what is meant by the term “sustainable competitive advantage.” What should a technology venture do in the modern global economy to develop this?

1. What are the two primary elements of a going concern?

2. What does it mean to say that a business is a purposeful activity?

3. How does a business determine whether or not its products and services are valuable? Define the relationship between price and quality, and their effects on value.

4. Explain the role of a value proposition for a business. What is the value proposition for YouTube?

5. Describe how a capitalist economy differs from a socialist economy.

Diagrammatically the impact on firms profit if in the short run demand for the product reduces

As the district manager for a region of retail discount clothing stores, Henry Banks is preparing for a quarterly meeting with all of the store managers in his district. As part of a presentation about company hiring practices, he plans to stress the importance of diversity. He knows the company needs a diverse workforce to meet the needs of the company’s diverse customer base; however, he is not sure how to convey this to the group of store managers. What do you think Henry should say in his presentation?

(600 words)

John is a successful business owner. His landscaping business is growing, and a few months ago he decided to bring in somebody to manage his office operations since he had little time to keep on top of that activity. However, this individual can’t seem to make a decision without agonizing about it over and over and on and on. What could Juan do to help this person become a better decision maker?

(500 words)