Small Business Finance Syllabus - BBA (PU)

Course Objectives

This course is designed for students seeking a full understanding of the financial aspects and issues of a small business.  By looking at financial statements, forecasts, budgeting and breakeven analysis, the student will gain a solid foundation of the financial concepts and skills necessary for the launching and operating a small business.

Course Description

This course deals with the fundamentals of small business finance, preparing financial statements, evaluating operating and financial performance, managing cash flows, costs of capital, Creating and recognizing venture value, professional venture capital, other financial alternatives and financial distress.

Course Outcomes

By the end of this course, students should be able to:

• Understand the fundamentals of small business finance;
• Prepare and use small business financial statements;
• Evaluate operating and financial performance of small business;
• Manage small business cash flows;
• Determine costs of financial capital;
• Create and recognize venture value;
• Know professional venture capital; and
• Use alternative financing and resolve financial distress

Course Contents

Unit I: Introduction                                                                                                   5 hours

Concept and nature of small business finance; Organizing and financing a small business; Forms of small business organization; Choosing a form of organization and its tax and other considerations; Seed, start-up and first round financing sources: financial bootstrapping, Business angel funding and first-round financing opportunities.

Unit II: Preparing and Using Financial Statements                                                 7 hours

Obtaining and recording necessary resources for small business; Business assets, liabilities and equity; Sales, expenses and profits; Internal operating schedules; Statement of cash flows; Operating and survival break even analysis; Identifying break even drivers in revenue projections.

Unit III: Evaluating Operating and Financial Performance                                   7 hours

Concept and need of operating and financial performance; Operating and financial performance measures by stages of life cycle; Financial ratios; Cash burn rates and liquidity ratios; Measuring financial leverage ratios; Profitability and efficiency ratios; Industry comparable ratio analysis.

Unit IV: Managing Cash Flows                                                                                 6 hours

Financial Planning throughout venture life cycle; Surviving in the short run; Short-term cash planning; Projected monthly financial statements; Cash planning from projected monthly financial statements; Conversion period ratios.

Unit V: Costs of Financial Capital                                                                            5 hours

Implicit and explicit financial capital costs; Determining the cost of debt capital; Concept and measures of investment risks; Estimation of cost of equity capital; Weighted average cost of capital; Life cycle weighted average cost of capital.

Unit VI: Creating and Recognizing Venture Value                                                6 hours

Concept of venture worth; Basic mechanics of valuation; Required versus surplus cash; Just-in-time equity valuation; Accounting versus equity valuation cash flows; Basic venture capital valuation method; Earning multipliers and discounted dividends.

Unit VII: Professional Venture Capital                                                                   6 hours

Concept and nature of professional venture capital; Professional venture investing cycle; Determining fund objectives and policies; Organizing new fund; Soliciting investments in new funds; Obtaining commitments for a series of capital calls; Conducting due diligence and actively investing;  Arranging harvests or liquidation; Distributing cash and securities proceeds.

Unit VIII: Other Financing Alternatives and Financial Distress                            6 hours

Facilitators, consultants and intermediaries; Commercial and venture bank lending; Credit cards; Government financing programs; Receivables lending and factoring; Debt, debt substitutes and direct offerings; Concept and nature of financial distress; Resolving financial distress. 

Basic Text

Leach, J. C., and Melicher, R. W. Entrepreneurial Finance. New Delhi: South-Western

References

1. Leach,  C. and Melicher, Ronald W. Finance for Entrepreneurs. New Delhi: Cengage Learning
2. Smith, J. K., Smith, R. L. and Bliss, R. T. Entrepreneurial Finance: Strategy, Valuation and Deal Structure. California: Stanford University Press

Ahmed, R. Rural Banking and Economic Development, Mittal publications, New Delhi