Unit 5 Study Guide: Financing the New Venture

The following study guide is meant to help you prepare for the final exam. This material is for your practice and review only. You will not be asked to turn in your responses to the questions and activities below. As you work through these study guides, take note of your confidence level with the material. Ask yourself if you feel comfortable with your grasp of these topics, and take the suggestions for resources to re-watch or re-read seriously before proceeding to the final exam.

5a: Explain the importance of the financial plan

5a.1. There are two main branches of business accounting: financial accounting and managerial accounting.

A. Explain the differences between financial and managerial accounting.

B. Define the different types of accounts utilized by a business: asset accounts, liability accounts, equity accounts, revenue or income accounts, expense accounts, and contra accounts.

C. Explain accrual accounting.

5a.2. Financial statements are records of the financial health and position of a company.

A. Identify how businesses utilize each of the following financial statements: the income statement, the balance sheet, the cash flow statement, and statement of changes in equity.

B. Explain the elements of the accounting equation.

C. Define break-even analysis.

5a.3 The financial plan, as a whole, can help you measure the value of your company.

A. Identify potential sources of value such as stocks, assets, and comparables (such as competition and industry standards).

B. Describe how current value can be determined by past financial performance.

C. Explain how a company’s stage of life relates to financial risk factors, and how these impact the overall plan for growth.

Understanding where your company’s money is coming from, and where it is going, are essential for the financial health of the organization. To boost your confidence in your understanding of financial statements, take a few moments to review these resources:


5b: Explain how to finance personal business ventures.

5b.1. Businesses can be financed through personal investment or with the help of outside investors.

A. Describe the traditional types of investment sources for a business venture: angel investors, bootstrapping, venture capitalists, micro-lending, peer-to-peer lending, banks/financial institutions, and government agencies. 

B. Define innovative ways to finance a business venture: customer financing, crowd funding, bartering.

 Are you familiar with all of the traditional and innovative ways in which a new business venture can be financed? If not,consider revisiting Mark Juliano’s podcast “Funding the Company,”Jeanne Holden’s article “Sources of Financing,”Boundless: Business: “Chapter7, Section 4: Financing Company Operations,” and the other resources beneath subunits 5.2.1 through 5.2.9 to clear up weaker areas.


Unit 5 Vocabulary

This vocabulary list includes terms that might help you answer some of the review items above and some terms you should be familiar with to be successful in completing the final exam for the course.

  • Accrual accounting
  • Angel investor
  • Asset accounts
  • Assets
  • Balance sheet
  • Barter
  • Bootstrapping
  • Break-even
  • Cash flow statement
  • Contra accounts
  • Crowd funding
  • Debt
  • Equity
  • Equity accounts
  • Expenses
  • Financial accounting
  • Financial equation
  • Grants
  • Income
  • Income statement
  • Liabilities
  • Loans
  • Managerial accounting
  • Micro-lending
  • Peer-to-peer lending
  • Revenue
  • Statement of equity
  • Strategic partnership
  • Venture capitalist
  • Working capital
Last modified: Wednesday, July 17, 2019, 6:04 PM