Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

Finance 1.Financial Planning 2.Financial Analysis 3.Principles of Investments 4.Cash Management Control 5.Financial Forecasting a.Cost projection  Start-up costs  Monthly expenses  Working Capital  Variable cost  Sales projection b. Break-even point c. Pro Forma financial statements  Income Statement  Balance Sheet  Cash Flows d. Ratio Analysis  ROI  ROE  Net Working Capital  Other Ratios e. Capital Requirements 6. Financial Risk Management

Why Study Entrepreneurial Finance? Entrepreneurial finance is the study of value and resource allocation, applied to new ventures. It addresses key questions which challenge all entrepreneurs: How much money can and should be raised; When should it be raised and from whom; What is a reasonable valuation of the startup; and How should funding contracts and exit decisions be structured. Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

Entrepreneurial Financial Planning Financial planning allows entrepreneurs to estimate the quantity and the timing of money needed to start their venture and keep it running. The key questions for an Entrepreneur are: Is it worthy to invest time and money in this business? ( Can I offer the product or the service with profit?) What is the cash burn rate? How to minimize dilution by external investors? Scenario analysis and contingency plan? Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

Entrepreneurial Financial Planning The financial plan is a necessary part of evaluating a new investment opportunity. With it you develop an estimate of your profit potential Determination of the Financial Need of a Start-up Calculation of start-up costs (one-time costs) Determination of projected sales, their growth and the profitability level, in addition to the projected financial statements Estimation of recurring costs Projection of working capital (inventory, credit and payment policies. This determines the cash needed to maintain the day-to-day business Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

Why Financial Planning? 1. Uncertainty about the future: in terms of start-ups development possibilities, market and industry trends. The greater the uncertainty of a venture or project, the greater the distribution of possible outcomes. 2.Information gaps: differences in sources of information collection and analysis that influence a company’s investment decisions. 3.Volatility of current market conditions: financial and product markets can change overnight, affecting a venture’s current value and its potential profitability Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

Why Financial Planning? The financial portion of your business plan will be examined closely by those interested in joining you, investing in the venture, or lending you money, so it must be thorough. They will want to know how you will use invested funds to create a successful venture. Forecasts of product demand, revenues, and expenses for new ventures will draw on the market research you conducted. Your projections are only as good as your assumptions, so make sure they are valid and realistic. Document as much as you possibly can, including how you developed your assumptions. Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

Financial Analysis (Also referred to as financial statement analysis or accounting analysis or Analysis of finance) refers to an assessment of the viability, stability and profitability of a business, sub-business or project. The process of evaluating businesses, projects, budgets and other finance-related entities to determine their suitability for investment. Typically, financial analysis is used to analyze whether an entity is stable, solvent, liquid, or profitable enough to be invested in. When looking at a specific company, the financial analyst will often focus on the income statement, balance sheet, and cash flow statement. Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

Financial Analysis in Entrepreneurship Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years, watching especially for any unfavorable trends that may be starting Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

References Donald E. Vaughn (2013) “Financial Planning for the Entrepreneur”, Southern Illinois University at Carbondale; Prentice Hall, New York. Alemany, L. (2014) "Entrepreneurial Finance: Lecture Slides, ESADE Master in Innovation and Entrepreneurship Year 2013/2014", ESADE, Barcelona Berkery, D. (2007), Raising Venture Capital for the Serious Entrepreneur, McGraw-Hill Book Company, New York. Gompers, P. and Lerner, J. (2011), The Money of Invention, Harvard Business School Press, Boston. Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen