Funancial Capital
Type of risk that a borrower will not pay the interest and/or principal.
Default Risk
Fill in the blank: Cash is ___________
Currency
What financial statement would you use to find the numbers you need to calculate the cash burn of a new venture?
The statement of cash flows
What is the first stage of financing that new ventures go through?
Bootstrapping
What breed is Dr. O'Steen's dog?
Welsh Terrier
Name two of the four specific determinants of interest rate risk.
Inflation premium, Default risk premium, maturity premium, liquidity premium
What will happen to C^3 if the purchase-to-payment conversion period decreases?
C^3 will increase
The monthly burn rate of a new venture is -7.5. Cash at the beginning of this period was 50. Cash at the end of this period is 20. How long will it take for the business to run out of cash?
Time to out of cash = 20/7.5 = 2.7 months
Where did Health Ade begin?
Los Angeles
What is the number of Dr. O'Steen's office?
CCB 318
What is the interest rate charged by banks to their highest quality customers?
Prime rate
What does a cash conversion cycle of 30 mean?
It took a company 30 days on average to convert its investments into inventory, material, etc. into cash payments from sales.
A new venture has the following:
Net cash flow from operating activities = -25
Net cash flow from investing activities = -50
Net cash flow from financing activities = 75
What is the annual net cash burn?
Annual net cash burn = -25 - 50 = -75
How long is the life of a utility patent?
20 years
Who is the TA for our class?
Stephanie Hasselkus
What is investment risk?
Chance or probability of financial loss from a venture investment
For a high-growth, new venture, what does a graph of the cash levels look like until the venture is at maturity?
It looks like big cash injections followed by steep drops in cash
A company has $100,000 recorded on the common stock account. It has 100,000 shares issued. The par value of each share is $0.01. What is the additional paid in capital?
$100,000 - $100,000*0.01 = $99,000
What are two characteristics of private financial markets that make them different from public financial markets?
Customized contracts, low liquidity/small market, private negotiations, no organized exchange
What sport did Dr. O'Steen play in college?
Racquetball
This is the term for optimism for a new venture that ignores the possibility of failure or underperformance.
Venture hubris
What does an purchase-to-payment conversion period of 54 mean?
It took a company 54 days after purchasing materials and paying employees to make a payment for those things in cash.
Why can GAAP accounting be problematic for a new venture?
Accrual accounting can obscure the cash situation of the company
What are the three criteria for a patent application to be accepted?
Must be useful, novel, and non-obvious
What day is our first guest speaker coming?
Sabrina Weiwel is coming on March 14