Chapter 7: Part 3 (Pages 7-8)

Venture capitalists

Investors who provide money for the business only after the company has been operating successfully for some years and they feel that it is already an established one.

Early stage financing

Here an individual or venture capitalist company provides the seed money to start the business and keeps it running quickly.

Expansion financing

The small company has a definite product and/or service offering to sell and it has an identified target market. Possibly, the business has started a favorable direction.

Buy out financing

VCs will be providing money to buy out a company or buy out branches of other companies.

Angel Investors

Those individuals or a larger group that make available financial backing at an early phase of the business at advantageous terms and do not typically participate in the management of the venture. They are commonly wealthy individuals and friends or family of the business owner who can invest a large amount of money in a startup.

Crowdfunding

Raising money for an individual or company by collecting donations from a large number of individuals to fund a startup business.

Donation

Based is where individuals group together their resources to back up a benevolent cause.

Reward

based is where individuals

Provide money to a company in exchange for a reward or something in return usually a product made by the company.

Lending

Based is where individuals loan money to a company and accept the company's legally-binding commitment to pay back the loan.

Equity

Based is where individuals finance in shares sold by a company and obtain a part of the profits in the form of a dividend or distribution.

Initial Public Offering

In this type of fundraising, a company can source out funds by offering shares of the company to the public.

Financial Statements

Formal record of the financial activities of an entity. These are written reports that quantify the financial strength, performance and liquidity of a company.

Income Statement

A summary of a company's total revenue and its operating expenses for a given period such as per month, per quarter of a year or for one year.

Sales

This number represents the total amount of revenue produced by the business.

Cost of Goods Sold

Known also as Cost of Sales this number includes all of the costs and expenses directly related to the production of goods and/or services.

Gross Profit

This number is the profit of the company after subtracting the expenses related to manufacturing and selling its products, or the costs associated with providing its services.

Operating Expenses

These include the expenses incurred every day in the operation of a business.

Total Expenses

This is a sum of all expenses acquired in business, without yet the taxes or interest expense on interest income, if there is any.

Net Income Before Taxes

This figure is the amount of income earned by a business before paying income taxes by deducting total operating expenses from gross profit.

Taxes

This is the amount of income taxes that an entrepreneur is indebted to the government both local and national.

Net Income

This is the amount of money the business has produced after paying income taxes.