UNIT-1

1. What is entrepreneurship and startups?

Ans: Startups are founded by one or more entrepreneurs who want to
develop a product or service for which they believe there is demand.

2. What is the role of entrepreneurship in startups?

Ans: An entrepreneur always attempts to bring change in terms of
factor proportions which is called innovation. The reward of an
entrepreneur for his risk bearing role is profits. Entrepreneurship
involves mobilizing resources and combining them to initiate change
in production.

3. What is the difference between entrepreneur and Startup

Company?
Ans: An entrepreneur starts or invests in a company as a source of
income. While startup founders are dedicated to growing their
company and making an impact on the world, entrepreneurs focus on
finding the most efficient route to profitability.

4. What is start up entrepreneurship examples?

Ans: Examples of such startups include Google, Uber, Facebook, and
Twitter. These startups hire the best workers and search for investors
to boost the development of their ideas and scale. Small business
startups. These businesses are created by regular people and are
self-funded.

5. What are the 4 types of entrepreneurship?

Ans: Most often, the types of entrepreneurship are broken into four
categories:

1. small business.
2. scalable startups.
3. large company or Intrapreneur.
4. social entrepreneurship

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 1. Concept of Entrepreneurship

Entrepreneurship is the process of creating a new business venture, or the

process of identifying and developing a new business opportunity. It is a
risky endeavor, but it can also be very rewarding. Entrepreneurs are
individuals who are willing to take risks and who are able to see
opportunities where others do not. They are also typically creative and
innovative, and they are able to identify and solve problems.

2. Core competencies in entrepreneurship

 Risk-taking abilities.
 Out-of-the-box thinking and creativity.
 Problem-solving abilities.
 Taking initiative.
 Persistence.
 Persuasion and social skills.
 Business management skills.
 Critical thinking skills
What are the risks of entrepreneurship?

3. The risks of entrepreneurship

 Market risk. Factors affecting a market sector or the economy can impact
new businesses, and aspiring entrepreneurs need to take these risks into
account. ...
 Financial risk.
 Competitive risk.
 Technology risk.
 Career fulfillment.
 Work-life balance.
 Leadership experience.
 Company control.
4. What are the functions of entrepreneurship?
The various functions of entrepreneurship are:
 Innovation and creativity,
 Risk taking and achievement

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  organization and management,
 Catalyst of Economic Development,
 Overcoming Resistance to Change
 Research

5. What is the importance of values for an entrepreneur?

Answer:
Values are important for entrepreneurs because they provide a foundation
for decision-making and guide behavior. When entrepreneurs have strong
values, they are more likely to make decisions that are in line with their
beliefs and that will ultimately lead to success.

Here are some of the values that are important for entrepreneurs:

 Integrity: Integrity means doing the right thing, even when it is difficult.
Entrepreneurs who are seen as being honest and trustworthy are more
likely to be successful.
 Honesty: Honesty means being truthful and forthright. Entrepreneurs who
are honest with their customers, partners, and employees are more likely to
build trust and create a positive reputation.
 Passion: Passion means having a strong belief in your business and its
mission. Entrepreneurs who are passionate about their businesses are
more likely to be successful, as they are more likely to work hard and
persevere through challenges.
 Resilience: Resilience means being able to bounce back from setbacks.
Entrepreneurs who are resilient are more likely to succeed, as they are
more likely to learn from their mistakes and continue to move forward.
 Creativity: Creativity means being able to come up with new ideas and
solutions. Entrepreneurs who are creative are more likely to find new ways
to solve problems and grow their businesses.

Ultimately, the values that are important for entrepreneurs will vary
depending on the individual and the specific business. However, the values
listed above are some of the most important for entrepreneurs who want to
be successful.

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 6. What are the entrepreneurial abilities?

 Business Management Skills.

 Communication and Listening.
 Critical and Creative Thinking Skills.
 Strategic Thinking and Planning Skills.
 Branding, Marketing, and Networking Skills.
 Entrepreneurial Skills in the Workplace.
 Teamwork and Leadership Skills.

7. Entrepreneurial values, attitudes, and skills are the essential

qualities that entrepreneurs need to succeed in business. These
qualities include:

 Values:
o Hard work: Entrepreneurs believe in the importance of hard work and
dedication. They are willing to put in the long hours and effort necessary to
make their businesses successful.
o Risk-taking: Entrepreneurs are willing to take calculated risks. They
understand that failure is a part of the entrepreneurial journey, but they are
not afraid to fail.
o Innovation: Entrepreneurs are always looking for new and better ways to
do things. They are not afraid to challenge the status quo and are always
looking for ways to improve their businesses.
o Giving back: Entrepreneurs believe in the importance of giving back to the
community. They are often involved in charitable giving and other forms of
community service.
 Attitudes:
o Optimism: Entrepreneurs are optimistic about the future. They believe that
they can achieve their goals, even if the odds are stacked against them.
o Commitment: Entrepreneurs are committed to their goals. They are willing
to make sacrifices and work hard to achieve their dreams.
o Resilience: Entrepreneurs are resilient in the face of setbacks. They do not
give up easily and are always looking for ways to overcome challenges.

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 Skills:
o Problem-solving: Entrepreneurs are good problem-solvers. They are able
to identify and address problems quickly and effectively.
o Communication: Entrepreneurs are effective communicators. They are
able to articulate their ideas clearly and concisely to both internal and
external stakeholders.
o Leadership: Entrepreneurs are natural leaders. They are able to motivate
and inspire others to achieve common goals.
o Marketing: Entrepreneurs are skilled marketers. They are able to create
and execute marketing strategies that reach their target audience.
o Financial: Entrepreneurs have strong financial skills. They are able to
manage their businesses' finances effectively.
These are just some of the entrepreneurial values, attitudes, and skills that
are essential for success in business. If you are considering starting your
own business, it is important to develop these qualities. This will give you
the best chance of success.

8. Mindset of an employee/manager and an entrepreneur

The mindset of an employee/manager and an entrepreneur is quite

different. Here are some of the key differences:

 Focus: Employees and managers are typically focused on following

instructions and meeting expectations, while entrepreneurs are focused
on creating new things and finding new ways to do things.

 Risk-taking: Employees and managers are typically more risk-averse,

while entrepreneurs are more willing to take risks.

 Ownership: Employees and managers typically do not have a sense of

ownership over their work, while entrepreneurs have a strong sense of
ownership over their businesses.

 Rewards: Employees and managers are typically rewarded for following

instructions and meeting expectations, while entrepreneurs are rewarded
for creating new things and taking risks.

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 Motivation: Employees and managers are typically motivated by job
security and a steady paycheck, while entrepreneurs are motivated by the
challenge of creating something new and the potential for financial
success.

9. Types of Ownership for Small Businesses

Sole proprietorship: A sole proprietorship is a business that is owned and

operated by one person. The owner is personally liable for the debts and
liabilities of the business. This means that if the business fails, the owner
could lose their personal assets, such as their home or car. Sole
proprietorships are the simplest and least expensive type of business to
form. They are also the most common type of business ownership in the
United States.

Partnership: A partnership is a business that is owned and operated by

two or more people. The partners are personally liable for the debts and
liabilities of the business. This means that if the business fails, the partners
could lose their personal assets. Partnerships are more complex and
expensive to form than sole proprietorships. However, they offer some
advantages, such as the ability to raise more capital and the ability to share
the workload.

Joint stock company: A joint stock company is a business that is owned

by shareholders. The shareholders are not personally liable for the debts
and liabilities of the business. This means that if the business fails, the
shareholders could only lose the amount of money they invested in the
business. Joint stock companies are more complex and expensive to form
than sole proprietorships and partnerships. However, they offer some
advantages, such as the ability to raise more capital and the ability to
transfer ownership more easily.

Public limited company: A public limited company (PLC) is a joint stock

company that is listed on a stock exchange. This means that the shares of
the company can be bought and sold by the general public. PLCs are
subject to more government regulation than private limited companies.
However, they also offer some advantages, such as the ability to raise
more capital and the ability to trade their shares on a stock exchange.

Private limited company: A private limited company (Ltd) is a joint stock

company that is not listed on a stock exchange. This means that the shares

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of the company can only be bought and sold by the members of the
company. Ltds are subject to less government regulation than PLCs.
However, they also offer some advantages, such as the ability to keep their
financial information private.

Feature Public Limited Private Limited Company

Company (PLC) (Ltd)
Number of At least 7 As few as 2
shareholders
Transferability Can be bought and sold Can only be bought and sold
of shares by the general public by the members of the
company
Liability of Not personally liable for Personally liable for the debts
shareholders the debts and liabilities of and liabilities of the company
the company up to the amount of their
investment
Government Subject to more Subject to less government
regulation government regulation regulation
Financial Must be made public Can be kept private
information

10. differences between entrepreneurs and intrapreneurs:

Feature Entrepreneur Intrapreneur

Definition Individual who starts Employee who takes on

their own business entrepreneurial responsibilities
within a larger organization

Responsibility Overall success or Developing and launching new

failure of the business products or services within the
organization

Risk High risk Lower risk

Reward Potential for high Potential for career advancement

financial reward and recognition

Motivation Desire to be their own Desire to make a difference within

boss and create their organization and be
something new recognized for their contributions

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 UNIT-2
Business Idea-
A business idea is a concept for a new business or product that solves a
problem or meets a need in the market. A promising business idea is one
that has the potential to be successful, profitable, and scalable.
There are a number of characteristics that can make a business idea
promising. These include:
 The problem or need that the business idea solves is large and
addressable. There is a large enough market for the business idea to be
successful.
 The solution that the business idea provides is unique and differentiated
from the competition. The business idea offers something that is new and
different, and that customers will find valuable.
 The business model is scalable. The business idea can be easily replicated
and expanded, so that the business can grow and generate profits.
 The team behind the business idea is experienced and capable. The team
has the skills and experience necessary to execute the business idea and
make it successful.
A business idea is a concept that can be used for financial gain that is
usually centered on a product or service that can be offered for money. An
idea is the first milestone in the process of building a successful business.
The characteristics of a promising business idea are:
 Innovative
 Unique
 Problem solving
 Profitable
 Understandable
Uniqueness of the product or service and its competitive advantage over
peers:
A differentiation strategy is one that involves developing unique goods
services that are significantly different from competitors. Company that

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 employ this strategy must consistently invest in R&D to maintain on
improve the key Product or service features.
a) If your Product or service is truly unique, it can be difficult for
Competitors to copy what you are doing.
b) This can give you a Competitive advantage and help you succeed in
your industry.
c) If you are looking to grow your business and attract new customers,
focus on creating a Unique Product or Service.
Here are some examples of businesses that have successfully created
unique products or services with a strong competitive advantage:
 Apple: Apple has created a number of unique products and services,
including the iPhone, the iPad, and the Apple Watch. These products are
all highly innovative and offer a unique value proposition to consumers.
 Tesla: Tesla has created a unique electric car that is both stylish and
efficient. The Tesla Model S is the best-selling electric car in the world, and
it has helped to make Tesla a leading force in the automotive industry.
 Netflix: Netflix has created a unique streaming service that allows users to
watch movies and TV shows on demand. Netflix has a large library of
content, and it offers a convenient and affordable way to watch
entertainment.
These are just a few examples of businesses that have successfully
created unique products or services with a strong competitive advantage. If
you are looking to start your own business, it is important to consider how
you can create a unique offering that will set you apart from the
competition.
11. Feasibility Study

A feasibility study is a study that is conducted to determine the viability of

a business idea or project. It is a comprehensive analysis of the potential
risks and rewards of the project, and it is used to make a decision about
whether or not to proceed with the project.
A feasibility study typically includes the following sections:
 Executive Summary: This section provides a brief overview of the project
and the findings of the study.

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 Introduction: This section provides background information on the project,
including the problem or need that the project is intended to solve.

 Locational Feasibility: Locational feasibility refers to the assessment of

whether a proposed project or activity can be successfully implemented at
a specific location. It involves analyzing factors such as availability of
suitable land or space, proximity to necessary resources (e.g., raw
materials, labor, markets), transportation infrastructure, utilities, and zoning
regulations. The goal is to determine if the chosen location is suitable and
compatible with the project's requirements and objectives.
 Economic Feasibility: Economic feasibility focuses on assessing the
financial viability and profitability of a project. It involves analyzing the costs
and potential benefits associated with implementing the project. Factors
considered include capital investment, operational costs, revenue
generation potential, market demand, return on investment (ROI), payback
period, and overall financial sustainability. The objective is to determine if
the project is economically viable and can generate a positive return.
 Technical Feasibility: Technical feasibility evaluates the technological
aspects and requirements of a project. It involves assessing whether the
necessary technology, infrastructure, and expertise are available or can be
developed to implement the project successfully. This evaluation considers
factors such as availability of skilled labor, technical resources, equipment,
software, compatibility with existing systems, and any technical risks or
challenges that may arise. The goal is to determine if the project can be
implemented using existing or readily available technology and if any
technical obstacles can be overcome.
 Environmental Feasibility: Environmental feasibility focuses on
evaluating the potential impact of a project on the natural and social
environment. It involves assessing the environmental implications, such as
air and water pollution, habitat destruction, noise levels, waste generation,
and carbon emissions, as well as the potential social and cultural impacts
on local communities. Environmental feasibility aims to ensure that the
project can be implemented in a sustainable manner, minimizing negative
environmental and social consequences and complying with applicable
environmental regulations and standards.

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 Conclusion: This section summarizes the findings of the study and
provides recommendations for the project.
Features of Feasibility Study-
 Helps in determining the viability of the plan.
 Access risk and propose solution.
 Concludes if the plan fits the objects of the company.
Structure and Contents of a standard Feasibility Study Report:
A feasibility report is a paper that examines a proposed solution and
evaluates whether it is possible, given certain constraints. It includes six
sections: introduction, background information, requirements,
evaluation, conclusions, and finally, the recommendation or final
opinion section.

Business Plan-
A business plan is a written document that describes your business, its
goals, and how you plan to achieve them. It is a roadmap for your
business, and it can be used to attract investors, secure funding, and guide
your business decisions.

All experienced entrepreneurs had to start from somewhere. One place

where to start from is the beginning: the business plan. This is the basic
structure you can follow when you do not know how to go about it.

1. Cover page

Small but important, it should include the name of the business and your
name and contact information.

2. Table of Contents

It should allow readers to quickly skim or flip through to get to the included
topic they are most interested in.

3. Executive Summary

Brief and formal explanation of what your company is, how far is going to
reach, and why it is going to be successful.

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4. Business Description

An in-deep overview of the proposed venture. The final aim is to make

potential investors quickly grasp the concept of the business and its value
proposition.

5. Industry Background

Provide past and current data about the shape, size, trends, and critical
features of the industry you are trying to get in.

6. Competitive Analysis

Look at current and prospective rivals and competitors.

Who are your competitors?
Which are your competitors' strengths and weaknesses?
What distinguishes your business from theirs?

7. Market Analysis

Focus on your customers, their likes, needs, and demographics. The aim is
to demonstrate that there is really an opportunity for your venture in the
market.

8. Management Summary
Introduce your team and the description of how are they going to rock it
together.

9. Operations Plan
Focus on the daily business activities and the strategies that will support
them.

10. Marketing plan

Or the detailed strategy of how are you going to sell your product or
service.

11. Financial Plan

The current and future projections of your business financial performance.

12. Attachments and milestones

And all those additional documents that can provide valuable, additional
information to the business plan.

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 Structure and Contents of a typical Business plan-

If we analysis the structure and the contents of a typical business plan, we

can follow these -

1. Description and ownership of proposed business.

2. Assessment of the business environment (Market research):

 Economic environment.
 Industry environment.
 Global Environment.

3. Management Plan:
 Organizational structure Production Process.
 Human resources. .

4. Marketing plan:
 Target market
 Product Characteristics.
 Pricing
 Distribution
 Promotion

5. Final Financial plan

 Funds needed.
 Feasibility
6. Summary.

There are many features of a business plan, but some of the most
important include:

 Clarity: A business plan should be clear and concise. It should be easy to

read and understand, and it should be free of jargon.

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 Specificity: A business plan should be specific. It should not just state your
goals, but it should also provide a detailed plan for how you plan to achieve
them.
 Realism: A business plan should be realistic. It should not make unrealistic
projections about your financial performance or your ability to achieve your
goals.
 Timeliness: A business plan should be updated regularly to reflect changes
in your business. This will help you keep your plan relevant and accurate.
 Feasibility: A business plan should be feasible. It should be based on
sound financial and marketing analysis, and it should be realistic about the
challenges you face.
 Flexibility: A business plan should be flexible. It should be able to adapt to
changes in the market or in your business.
 Actionable: A business plan should be actionable. It should provide you
with a roadmap for how you can achieve your goals.

Project Report:

A project report is a document that summarizes the key aspects of a

project, including its goals, timeline, budget, progress, and outcomes. It is a
valuable tool for project managers and stakeholders, as it provides a way to
track the progress of a project, identify potential risks and challenges, and
communicate the project's status to others.

Here are some of the key features of a project report:

 Clarity: A project report should be clear and concise. It should be easy to

read and understand, and it should be free of jargon.
 Specificity: A project report should be specific. It should not just state the
project's goals, but it should also provide a detailed plan for how the project
will be achieved.
 Realism: A project report should be realistic. It should not make unrealistic
projections about the project's timeline, budget, or outcomes.
 Timeliness: A project report should be updated regularly to reflect changes
in the project. This will help keep the report relevant and accurate.

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 Feasibility: A project report should be feasible. It should be based on
sound planning and analysis, and it should be realistic about the challenges
the project faces.
 Flexibility: A project report should be flexible. It should be able to adapt to
changes in the project or in the environment.
 Actionable: A project report should be actionable. It should provide project
managers and stakeholders with a roadmap for how the project can be
achieved.

The components of a project report will vary depending on the specific

project, but some common components include:

 Executive summary: This is a brief overview of the project report. It

should highlight the key points of the report and make a compelling case
for the project.
 Introduction: This section provides an overview of the project, including its
goals, scope, and timeline.
 Background: This section provides some context for the project, including
the problem the project is trying to solve and the need for the project.
 Methodology: This section describes how the project will be conducted,
including the research methods that will be used.
 Results: This section presents the findings of the project, including the
data that was collected and the analysis that was conducted.
 Discussion: This section discusses the implications of the project's
findings, including the recommendations for future research or action.
 Conclusion: This section summarizes the key points of the project report
and makes a final statement about the project's findings.

Basic Component of financial Statement:

The Basic component of financial statements are-

1) Balance sheets 2) Income Statements 3) Cash flow Statements

4) Statements of shareholders equity.

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 The element of the financial Statements will be-

(i) Assets, (ii) Liabilities, (iii) Net assets/equity, (iv) Revenues, (v)Expenses.

Revenue:

What Is Revenue?

Revenue is the money generated from normal business operations,

calculated as the average sales price times the number of units sold. It is
the top line (or gross income) figure from which costs are subtracted to
determine net income. Revenue is also known as sales on the income
statement.

Types of Revenue:
Revenue can be divided into:
Operating revenue: sales from a company's core business.
Non-operating revenue: which is derived from secondary sources. As
these non-operating revenue sources are often unpredictable or
nonrecurring, they can be referred to as one-time events or gains.
Formula and Calculation of Revenue
The formula and calculation of revenue will vary across companies,
industries, and sectors. A service company will have a different formula
than a retailer, while a company that does not accept returns may have
different calculations than companies with return periods. Broadly
speaking, the formula to calculate net revenue is:
Net Revenue = (Quantity Sold * Unit Price) - Discounts - Allowances -
Returns
Example of Revenue
Microsoft boasts a diversified product line that contributes many types of
revenue. The company defines its business in several different channels
including:
 Productivity and Business Processes: Office products (commercial and
consumer), LinkedIn, Dynamics products
 Intelligent Cloud: Server products and cloud services
 More Personal Computing: WIndows OEM, Windows Commercial, Xbox,
Surface.

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 Expenses: Expenses are the costs incurred by a company in the course of
doing business. They can be categorized as either operating expenses
(such as rent, salaries, and marketing costs) or non-operating expenses
(such as interest payments and depreciation).

 Operating expenses: Operating expenses are the costs directly related to

the company's day-to-day operations. They include costs such as rent,
salaries, marketing, and utilities.
 Non-operating expenses: Non-operating expenses are the costs that are
not directly related to the company's day-to-day operations. They include
costs such as interest payments, depreciation, and gains or losses on
investments.
Capital expenditure (CapEx) and revenue expenditure (RevEx) are two
different types of expenditures that are recorded on a company's financial
statements.

 Capital expenditure (CapEx) is an expenditure that is incurred to acquire,

maintain, or improve long-term assets. These assets can include property,
plant, and equipment (PP&E), intangible assets, and natural resources.
CapEx is typically recorded as an asset on the balance sheet and then
depreciated over time.
 Revenue expenditure (RevEx) is an expenditure that is incurred directly in
the course of generating revenue. These expenses can include cost of
goods sold (COGS), selling, general, and administrative (SG&A) expenses,
and research and development (R&D) expenses. RevEx is typically
recorded as an expense on the income statement in the same period in
which the revenue is recognized.

Here is a table that summarizes the key differences between CapEx and
RevEx:

Feature Capital expenditure (CapEx) Revenue expenditure (RevEx)

Definition Expenditures incurred to Expenses incurred directly in
acquire, maintain, or improve the course of generating
long-term assets. revenue.

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 Accounting Recorded as an asset on the
treatment balance sheet and then
depreciated over time.
Impact on Does not have a direct impact
cash flow on cash flow.
Examples Purchase of a new building,
purchase of new equipment,
renovation of existing property
Recorded as an expense on the
income statement in the same
period in which the revenue is
recognized.
Reduces cash flow in the
current period.
Cost of goods sold, SG&A
expenses, R&D expenses

Gross profit and net profit are two important financial metrics that are
used to measure the profitability of a company.

 Gross profit is the difference between a company's revenue and its cost of
goods sold (COGS). It is a measure of how much profit a company makes
from selling its products or services.

 Net profit is the difference between a company's revenue and all of its
expenses, including COGS, operating expenses, and non-operating
expenses. It is a measure of how much profit a company makes after
taking into account all of its costs.

Here is a formula for calculating gross profit:

Gross profit = revenue - COGS

Here is a formula for calculating net profit:

Net profit = revenue - COGS - operating expenses - non-operating

expenses

Gross profit is typically a higher percentage of revenue than net profit. This
is because COGS is typically a large portion of a company's expenses.

Net profit is a more important metric for investors than gross profit. This is
because net profit takes into account all of a company's expenses, not just
COGS.

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 What Is an Asset?
An asset is a resource with economic value that an individual,
corporation, or country owns or controls with the expectation that it
will provide a future benefit.

 Tangible assets: These include physical assets that can be seen and
touched, such as equipment, inventory, and real estate. Tangible assets
can be used to generate revenue, reduce costs, or improve the efficiency of
a business.
 Intangible assets: These include assets that cannot be seen or touched,
such as intellectual property, brand reputation, and goodwill. Intangible
assets can be just as valuable as tangible assets, and they can be a key
source of competitive advantage for a business.

What are liabilities?

Liabilities include everything your business owes, presently and in the

future. These include loans, legal debts or other obligations that arise in the
course of business operations. The loans are often used to finance your
operations, or pay for expansions or new equipment.

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 These are some examples of current liabilities:

 Accounts payable
 Interest payable
 Income taxes payable
 Bills payable
 Short-term business loans
 Bank account overdrafts
 Accrued expenses

The difference between an expense and a liability

An expense is the cost of operations that a company incurs to generate

revenue. The major difference between expenses and liabilities is that an
expense is related to your firm’s revenue. Expenses and revenue are listed
on an income statement but not on a balance sheet with assets and
liabilities.

Expenses can also be paid immediately with cash, while delaying payment
would make the expense a liability.

Expenses Liabilities

Cost of operating a business to

Obligations and debt the business owes
generate revenue

Closely related to a company’s Something the business owes now or in

revenue the future

Listed on a company’s income

Listed on a company’s balance sheet
statement

 Cash flow

Cash flow is the movement of money into and out of a business. It is an

important metric for entrepreneurs because it can help them to track the
financial health of their business and to make informed decisions about
their business operations.

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 There are two main types of cash flow:

 Operating cash flow: This is the cash flow that is generated from the day-
to-day operations of the business. It includes things like revenue,
expenses, and capital expenditures.

 Investing cash flow: This is the cash flow that is generated from investing
activities. It includes things like the sale of investments and the purchase of
new assets.

 Financing cash flow: This is the cash flow that is generated from
financing activities. It includes things like the issuance of debt and the
repayment of debt.

Cash Flow = Net income + Depreciation/Amortization – Change in

Working Capital – Capital Expenditure.

What are the 5 Principles of cash flow?

The Fine Principles of Cash flow are:

(i) Money has a time value.
(ii) Risk requires a reward.
(iii) Market Prices are generally right
(iv) Conflict of Interest Cause agency problems.
(v) The foundation of finance cash flow are what matters.

What is the formula for Net Present value (NPV)?

NPV = Cash flow / (1+i)^t - Initial investment

What is IRR (Internal rate of Return)?

The IRR to defined as the Compounded rate of return on an investment.

The IRR to the implied interest rate at which the initial investment must
have grown to reach the ending value from the beginning value.

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 What is 30% IRR ?

An IRR of 30% means that the rate of return on an investment using

Projected discounted
counted Cash flows will equal the initial investment
ent amount
are the Net Present Value
alue (NPV) is zero.

Working Capital :- It is the amount of cash and other current assets

asse a
business has available after all its current liabilities are accounted for.

Examples of Working Capital

Capital:

 Spontaneous: It refers to the Funds which are easily avail

available
able in market
o Sundry Creditors
o Bills Payable
o Trade credit
o Notes Payable
 Short Term WC :
o Bills Discounting
o Cash Credit
o Bank OD
o Commercial Paper
o Inter Corporate Loans and Advances

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 Working capital is calculated using the following formula:
Working capital = Current assets - Current liabilities

Importance of working capital:

 Working capital is important for businesses because it allows them to meet

their short-term financial obligations. This includes paying salaries, rent, and
other expenses.

 Working capital is also important for businesses because it allows them to

grow. When a business has a healthy working capital position, it can invest in
new products, services, and marketing. This can help the business to grow its
sales and profits.

 Finally, working capital is important for businesses because it helps them to

avoid bankruptcy. If a business does not have enough working capital, it may
not be able to meet its short-term financial obligations. This could lead to
bankruptcy.

Inventory:
Inventory is the stock of goods and materials that a business holds to sell
to its customers. It is an important asset for businesses because it allows
them to meet customer demand and generate sales. Example: If a
newspaper Vendor uses a vehicle to deliver newspapers to the Customers,
Only the newspaper will be consider as inventory. The vehicle will be
treated as an asset.
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 There are two main types of inventory:
 Raw materials: These are the materials that are used to produce a
product.
 Finished goods: These are the products that are ready to be sold to
customers.

What are funding method?

The main sources of funding are retained earning debt capital, and equity
capital.
# Company use retained earnings from business operations to expand or
distribute dividends to their shareholders.
# Business raise funds by borrowing debt privately from a bank or by going
public.

 Equity: This is when a business sells shares of ownership to investors.

Investors who buy shares of a company become owners of that company.
Equity funding is often used by startups and early-stage companies
because it does not require the business to repay the money. However,
equity funding can dilute the ownership of the founders and other early
investors.
 Debt: This is when a business borrows money from a lender. The lender
will typically charge interest on the loan, which the business must repay
over time. Debt funding can be a good option for businesses that need a
large amount of money quickly. However, debt funding can be risky if the
business cannot repay the loan.

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