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2017 | Book

Introduction to Entrepreneurial Finance Read chapter Read first chapter

Entrepreneurial Finance for MSMEs

A Managerial Approach for Developing Markets

Author: Joshua Yindenaba Abor

Publisher: Springer International Publishing

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

This book provides a framework for understanding micro, small and medium sized enterprises (MSMEs) as important contributors to economic growth. By examining the economic and investment decisions behind these businesses, the author shows how managers of MSMEs can add value to the firm by applying managerial finance tools. Early chapters establish the basic tenets of new venture development and financing and explore the economic environment that business-owners inhabit, focusing on venture capital, microfinance intervention, and public sector interventions. Later chapters guide the reader through the process of financial planning and forecasting, and valuation, finishing with insights into how to harvest investments and make sound financial decisions. The book has interdisciplinary appeal and offers a timely consideration of MSMEs in developing economies. It will be valuable reading for all interested in the management and development of small businesses, the finance of entrepreneurship and policy affecting small and medium sized enterprises.

Table of Contents

Frontmatter

The Entrepreneurial Setting

Frontmatter
1. Introduction to Entrepreneurial Finance
Abstract
By the end of this chapter, you should be able to:
  • • explain the concept of entrepreneurial finance
  • • discuss entrepreneurship and the importance of finance to the entrepreneur
  • • distinguish between entrepreneurial finance and corporate finance
  • • define micro, small and medium enterprises
  • • explain the characteristics and importance of micro, small and medium enterprises
  • • identify the constraints to the development of micro, small and medium enterprises
Joshua Yindenaba Abor
2. New Venture Development and Sources of Financing
Abstract
At the end of this chapter, you should be able to:
  • • explain the various forms of business ownership
  • • discuss the consequence of information asymmetry in new venture and small business financing
  • • identify the stages of a venture life cycle
  • • discuss financing through the venture life cycle
  • • describe the sources of financing available to MSMEs
  • • explain the elements of deal structure and how deals are closed
Joshua Yindenaba Abor
3. Business Planning
Abstract
By the end of this chapter, you should be able to:
  • • appreciate the difference between the business plans of new ventures and established small businesses
  • • discuss the purpose and importance of business plans
  • • describe the elements of a sound business plan
  • • explain the financial aspect of a business plan
  • • recognise the importance of using business plans to attract external finance
  • • appreciate the importance of due diligence to the entrepreneur and outside investors
  • • explain how to implement a business plan and the need to revise business plan
  • • provide reasons why some business plans fail
Joshua Yindenaba Abor

The Financial Environment and Finance Providers

Frontmatter
4. The Financial Environment and Small Businesses
Abstract
By the end of this chapter, you should be able to:
  • • identify the components of the financial environment
  • • explain how the financial environment affects business decisions
  • • describe the purpose of the financial market
  • • identify the types of financial institutions
  • • discuss the functions of financial institutions
  • • explain how interest rates are determined
Joshua Yindenaba Abor
5. Venture Capital Finance
Abstract
By the end of this chapter, you should be able to:
  • • explain the nature of venture capital
  • • discuss the advantages and disadvantages of venture capital
  • • show how venture capital firms are organised
  • • explain how venture capitalists enter into contracts
  • • indicate what venture capitalists consider before investing
  • • identify what constitute venture creation by venture capitalists
Joshua Yindenaba Abor
6. Microfinance Intervention
Abstract
By the end of this chapter, you should be able to:
  • • define and provide an overview of microfinance
  • • discuss the importance of microfinance
  • • explain the operations of microfinance institutions
  • • show the sustainability of microfinance institutions
  • • discuss the lending models and the credit risk management of microfinance institutions
  • • identify the challenges confronting microfinance institutions
  • • illustrate how banks participate in the microfinance market
Joshua Yindenaba Abor
7. Public Sector Interventions and Small Businesses
Abstract
By the end of this chapter, you should be able to:
  • • explain the channels through which government supports small businesses
  • • explain the rationale for public sector interventions
  • • discuss the role of the public sector in MSME development
  • • identify government- and donor-supported funding schemes
Joshua Yindenaba Abor

Financial Performance and Planning

Frontmatter
8. Understanding and Analysing Financial Statements
Abstract
By the end of this chapter, you should be able to:
  • • appreciate how businesses prepare and make use of financial statements
  • • explain the various forms of financial statements
  • • identify the elements of financial statements
  • • discuss the problems with financial statements
  • • perform vertical and horizontal analysis of a firm’s financial statements
  • • evaluate the performance of a firm based on financial ratios
  • • discuss the uses and limitations of ratio analysis.
Joshua Yindenaba Abor
9. Financial Planning and Forecasting
Abstract
By the end of this chapter, you should be able to:
  • • explain the concept of financial planning and the financial planning process
  • • understand how to prepare a cash budget
  • • appreciate how to prepare a sales forecast for an existing business
  • • understand how to prepare a sales forecast for a new business
  • • show the interrelationship between planning, budgeting and forecasting
  • • illustrate how to project financing needs and growth of MSMEs
  • • explain how to project financing needs using break-even analysis
  • • identify the determinants of MSMEs’ financing needs
Joshua Yindenaba Abor
10. Working Capital Management
Abstract
By the end of this chapter, you should be able to:
  • • explain the concept of working capital management
  • • describe the components of working capital management
  • • discuss the importance of proper inventory management
  • • appreciate how accounts receivable are efficiently managed
  • • explain the relevance of good cash management among firms
  • • discuss how firms invest excess cash through marketable securities management
  • • explain how firms’ current liabilities are managed
Joshua Yindenaba Abor

Valuation

Frontmatter
11. Time Value of Money
Abstract
By the end of this chapter, you should be able to:
  • appreciate the concept of ‘time value of money’
  • compare simple and compound interest
  • calculate future value lump sum and prevent value lump sum
  • distinguish between effective rate and stated rate
  • explain and calculate perpetuities
  • calculate future and present values based on annuities
  • distinguish between ordinary annuity and annuity due
  • explain and calculate amortisation
Joshua Yindenaba Abor
12. Evaluating Capital Investment Decisions: Capital Budgeting
Abstract
By the end of this chapter, you should be able to:
  • • explain the rationale for capital budgeting
  • • discuss the factors that affect capital budgeting decisions
  • • list and explain the steps involved in the capital budgeting process
  • • explain the techniques or methods used in evaluating capital budgeting projects
  • • show how capital budgeting decisions are arrived at based on independent and mutually exclusive projects
  • • determine how capital budgeting decisions are influenced by capital rationing
  • • appreciate the importance of following, monitoring and taking corrective measures after the capital budgeting decision has been made
Joshua Yindenaba Abor
13. Valuation of New Ventures and Small Businesses
Abstract
By the end of this chapter, you should be able to:
  • explain how new ventures and small businesses are valued
  • use the various valuation methods
  • appreciate the strengths and weaknesses of the valuation methods
  • understand the criteria for selecting a venture valuation model
Joshua Yindenaba Abor

Financing Choice and Harvesting

Frontmatter
14. Financing Choice
Abstract
By the end of this chapter, you should be able to:
  • • identify the various financing options available to MSMEs
  • • explain how to determine financing requirement
  • • discuss factors that affect the financing choice of MSMEs
Joshua Yindenaba Abor
15. Harvesting the Business Venture Investment
Abstract
By the end of this chapter, you should be able to:
  • • identify the various techniques involved in harvesting
  • • describe the process involved in going public and how investors can use going public to harvest their investment
  • • explain how investors can harvest their investing through acquisitions
  • • show how management buyout can be used as a form of harvesting
  • • describe how employee stock ownership can be used for harvesting
  • • discuss the factors that influence the investors’ harvesting decisions
Joshua Yindenaba Abor
Backmatter
Metadata
Title
Entrepreneurial Finance for MSMEs
Author
Joshua Yindenaba Abor
Copyright Year
2017
Electronic ISBN
978-3-319-34021-0
Print ISBN
978-3-319-34020-3
DOI
https://doi.org/10.1007/978-3-319-34021-0