Entrepreneurial Finance. Robert D. Hisrich

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      Printed in the United States of America

       Library of Congress Cataloging-in-Publication Data

      Gibbons, Gary E.

      Entrepreneurial finance: a global perspective / Gary Gibbons, Robert D. Hisrich, Carlos M. DaSilva.

      pages cm

      Includes bibliographical references and index.

      ISBN 978-1-4522-7417-1 (pbk.)

      1. New business enterprises—Finance. 2. International business enterprises—Finance. 3. Venture capital. 4. Entrepreneurship. I. Hisrich, Robert D. II. DaSilva, Carlos M. III. Title.

      HG4027.6.G53 2015

      658.15'99—dc23 2014024676

      This book is printed on acid-free paper.

      14 15 16 17 18 10 9 8 7 6 5 4 3 2 1

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       I dedicate this book to three exceptional friends and scholars:

       M. Lynne Markus

       David Drew

       James Logan

       —Gary Gibbons

       I dedicate this book to my great supporters:

       My wife, Tina

       My daughters, Kary, Katy, and Kelly

       My son-in-law, Rich

       My grandchildren, Rachel, Andrew, and Sara

       —Robert D. Hisrich

       I dedicate this book to entrepreneurs worldwide who have dedicated their lives to build meaningful companies; and

       To all future entrepreneurs who do not yet realize the potential and impact their dreams can have on the world; and

       Finally, I dedicate this book to all business mentors who voluntarily give their time to help the younger generation achieve success.

       —Carlos M. DaSilva

      Preface

      This book was conceived from the entrepreneurial perspective. Finance is a subject often neglected by the entrepreneur. According to the U.S. Small Business Administration, finance or, to be accurate, ignorance of finance is the root cause of 74% of small business failures. We believe that knowledge of finance is as essential to the manager's toolkit as the ability to sell, lead, and innovate. We also believe that finance should be made accessible to the entrepreneur from a pedagogical point of view. This book provides the entrepreneur the opportunity to develop the essential skills and conveys the necessary knowledge for him or her to be functional in the discipline, at least as far as his or her own business is concerned.

      At the beginning of each chapter, there is a short case. In some chapters, the information in the case is used to provide expanded explanations and examples. In other chapters, the case is meant to illustrate a common circumstance encountered by entrepreneurs that illustrates the entrepreneur's need to understand the material that follows. All of the cases are real cases, although some have had company names or the names of the principals changed. Regardless, the subject matter described in the cases is real, and in our opinion, the problems faced in the cases are common to most entrepreneurs and occur regularly in entrepreneurial settings.

      The field of finance is large and rapidly evolving. We have endeavored to relate information that is immediately usable and current, although not information that is subject to great controversy or rethinking. In some areas, such as understanding financial documents, ratio analysis, and cash flow management, the state of the art is settled. In other areas, such as cost of capital, capital budgeting, and valuation, much new thinking is permeating the field. In these cases, classical perspectives are provided on the techniques that are appropriate to the subject area. By making note of both the pros and cons of different methods or points of analysis, we have attempted to draw the reader's attention to some areas where new thinking is being actively put forth and debated. Also, the book provides references to some of the best sources from which the reader may find further information on the subject at hand. Finally, in the references, we have included some of the most current and interesting sources of thought on the subjects we have addressed.

      In our view, finance is one of the most interesting and useful of the social science paradigms, but it is only a tool. One cannot use it blindly and without the application of skill and judgment. The entrepreneur should use his or her knowledge of finance as he or she would any other tool. By itself, finance does not provide “the answer”; one cannot use it to calculate “the solution,” but it can be used to frame the problem and suggest a proper course of action. Nothing, and certainly not the discipline of finance, can replace the entrepreneur's drive, ability to convince others of the worth of his or her vision, or ability to tolerate the uncertainty that the entrepreneur faces in the pursuit of his or her dream.

      Acknowledgments

      We