Financial Ratios and Venture Investor Attractiveness
WEEK 1 HOMEWORK | Entrepreneurial Finance | Professor: Caryl Pedersen | | Roxanne Robinson | 5/12/2013 |
Chapter 1: Exercises/Problem #1 pp.33-34
1. [Financing Concepts] The following ventures are at different stages in their life cycles. Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.
A. Phil Young, founder of Pedal Pushers, has an idea for a pedal replacement for children’s bicycles. The Pedal Pusher will replace existing bicycle pedals with an easy-release stirrup to help smaller children hold their feet on the pedals. The Pedal Pusher will also glow in the dark and will provide a musical sound as the bicycle is pedaled. Phil is seeking some financial help in developing working prototypes.
Early-stage venture / Development Stage / Seed Financing
B. Petal Providers is a firm that is trying to model the U.S. floral industry after its European counterparts. European flower markets tend to have larger selections at lower prices. Revenues started at $1 million last year when the first “mega” Petal Providers floral outlet was opened. Revenues are expected to be $3 million this year and $15 million next year after two additional stores are opened.
Seasoned Firm / Rapid Growth Stage / Mezzanine Financing
Chapter 2: Exercises/Problem #2 A-C & E p.70 | Venture XX | Venture YY | Venture ZZ | After-tax Profit Margins | 5% | 25% | 15% | Asset Turnover | 2.0 times | 3.0 times | 1.0 times |
2. [Financial Ratios and Performance] Following is financial information for three ventures:
A. Calculate the ROA for each firm.
Return on Assets = Net Profit Margin x Asset Turnover
(Net Profit / Total Assets) = (Net Profit / Revenues) x (Revenues / Total Assets)
Venture XX = 5% x 2.0 = .05 x 2 = 0.1 = 10%
Venture YY = 25% x 3 = .25 x 3 = .75 = 75%
Venture ZZ = 15% x 1 =
Chapter 1: Exercises/Problem #1 pp.33-34
1. [Financing Concepts] The following ventures are at different stages in their life cycles. Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.
A. Phil Young, founder of Pedal Pushers, has an idea for a pedal replacement for children’s bicycles. The Pedal Pusher will replace existing bicycle pedals with an easy-release stirrup to help smaller children hold their feet on the pedals. The Pedal Pusher will also glow in the dark and will provide a musical sound as the bicycle is pedaled. Phil is seeking some financial help in developing working prototypes.
Early-stage venture / Development Stage / Seed Financing
B. Petal Providers is a firm that is trying to model the U.S. floral industry after its European counterparts. European flower markets tend to have larger selections at lower prices. Revenues started at $1 million last year when the first “mega” Petal Providers floral outlet was opened. Revenues are expected to be $3 million this year and $15 million next year after two additional stores are opened.
Seasoned Firm / Rapid Growth Stage / Mezzanine Financing
Chapter 2: Exercises/Problem #2 A-C & E p.70 | Venture XX | Venture YY | Venture ZZ | After-tax Profit Margins | 5% | 25% | 15% | Asset Turnover | 2.0 times | 3.0 times | 1.0 times |
2. [Financial Ratios and Performance] Following is financial information for three ventures:
A. Calculate the ROA for each firm.
Return on Assets = Net Profit Margin x Asset Turnover
(Net Profit / Total Assets) = (Net Profit / Revenues) x (Revenues / Total Assets)
Venture XX = 5% x 2.0 = .05 x 2 = 0.1 = 10%
Venture YY = 25% x 3 = .25 x 3 = .75 = 75%
Venture ZZ = 15% x 1 =