TIMS1301 Lecture Notes - Lecture 9: Initial Public Offering, Gain Capital, Capital Gain
New Venture Finance
Part 2 - Understanding Value and Managing Finance
Key Points
When you start your business be thinking about how you are going to exit it - build value into
your business that would be attractive to public investors
Sub-Topics
• Understanding Value
Understanding Value
Capital Gain
• Capital Gain is the value the entrepreneur realise when they exit the business
• Capital gain represents how much value the entrepreneur has built into the venture as
perceived by a buyer
• Capital gain = selling price - initial and subsequent investments
Capital Gain and Value
Common Exit Strategies
• Sell/Outright Sale - sell the business to another owner
• Mergers & Acquisitions (or strategic alliances) - sell the business to another company (or
merge with a partner company)
• Initial Public Offering (IPO) - sell parts of the business to institutions and the public through the
stock exchange
• Others:
o Capital/Cash Cow
o Employee Stock Ownership Plans (ESPO's)
o Management Buyout
Balance Sheet, Book Value and Financial Leverage
Friday, 27 April 2018
10:46 AM
Balance Sheet (Capital and Asset Structures)
find more resources at oneclass.com
find more resources at oneclass.com
• Reports financial position at a specific time
• Lists money that we obtained (liabilities and owner's equity) and the assets that we put money
into (Financing and Investing Activities)
• It is called a 'balance' sheet because the totals for assets and the totals for liabilities and
oe's euity ust 'alae'… that is, e eual
• The Accounting equation
o Owners' Equity = Assets - Liabilites OR Assets = Liabilities + Shareholders' Equity
• Oes Euity tells us the ook alue of the oes shaeholdes
investment in the company
• Retained earnings is that portion of profit that are not disbursed as
diided ad adds to the oes iestet i the opay
• Retained earnings are transferred from the income statement
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Part 2 - understanding value and managing finance. When you start your business be thinking about how you are going to exit it - build value into your business that would be attractive to public investors. Sell/outright sale - sell the business to another owner: mergers & acquisitions (or strategic alliances) - sell the business to another company (or merge with a partner company) Initial public offering (ipo) - sell parts of the business to institutions and the public through the stock exchange: others, capital/cash cow, employee stock ownership plans (espo"s, management buyout. Balance sheet (capital and asset structures: reports financial position at a specific time. Lists money that we obtained (liabilities and owner"s equity) and the assets that we put money into (financing and investing activities) Revenues - expenses: also be aware of how operational and financial risks are reflected in the income statement.
