Entrepreneurship

Feasible & Viable Launching of New Ventures

SANDEEP SINGHAL

Entreprendre

(derived as French word)

which means to initiate or undertake

The word entrepreneur is approx. 180 years old, having come into English from French in 1828

Who is Entrepreneur?At least a PersonWho is a PersonAny Human Being (but human are unique and critical)

Has own i) thinking, ii) working style and iii) reaction after receiving

(may be right or wrong in ones view)

Entrepreneur is a Person, who is IPS

I - Ability to initiate and Innovate

P - Can generate Profit and

S - Total work is dedicated to Society

Businessman

Politician

Robber

Director of any Institute

Employees

You

Its a development by which a Person

can be converted to an Entrepreneur

May be by their own by others or bothMost complex phenomenon (Not a set of rules)

with many factors like

psychological, ii) family imbibes, iii) qualification, iv) parental occupation, v) his standing etc.

It reflects; how to work?What is Entrepreneurial Development?

What is Entrepreneurship?Socio-economical activities; how an entrepreneur takes things (qualities & characteristics) in his nature, team and organization i.e. enterprise.

It is a process; how he works?That means it is in between an Entrepreneur and Enterpriseand if we combine all,,,

Types of Entrepreneur

On various classification

Type of businessUse of technologyMotivationGrowthAreaGenderAgeOthers

Types of BusinessTypes of GrowthA. Business EntrepreneurA. Growth EntrepreneurB. Trading EntrepreneurB. Super Growth EntrepreneurC. Agricultural EntrepreneurD. Retail EntrepreneurTypes of AreaE. Corporate EntrepreneurA. Urban EntrepreneurF. Industrial EntrepreneurB. Rural EntrepreneurG. Service EntrepreneurTypes of Gender Types of Use of TechnologyA. Men EntrepreneurA. Technical EntrepreneurB. Women EntrepreneurB. Non-technical EntrepreneurC. Professional EntrepreneurTypes of AgeD. High Tech EntrepreneurA. Young EntrepreneurE. Low Tech EntrepreneurB. Old EntrepreneurC. Middle aged EntrepreneurTypes of Use of MotivationA. Pure EntrepreneurOthersB. Induced EntrepreneurA. Imitation EntrepreneurC. Motivated EntrepreneurB. Forced EntrepreneurD. Spontaneous EntrepreneurC. Immigrant Entrepreneur

Traditional Definition of Entrepreneurship

Risk TakerFounderInnovatorCapitalistScoundrelBorn not Learned

Some Views of Entrepreneurship

Francis A. Walker (1876) - the new captains of industry as the principals agents of production and industrial process.Joseph Schumpter (1934) - the entrepreneur is the man who gets new things done.Peter F. Drucker (1964) - maximization of opportunities is a meaningful, indeed a precise, definition of the entrepreneurial job. It implies that effectiveness rather than efficiency is essential in business. The pertinent question is not how to do things right but how to find the right things to do, and to concentrate resources and efforts on them.William Baumol (1968) - he is the individual who exercises what in the business literature is called leadershipAlbert Shapero (1975) - a kind of behavior that includes: 1) initiative taking, 2) the organizing or reorganizing of social / economic mechanisms to turn resources and situations to practical account, 3) the acceptance of risk of failure. A major resource utilized by the entrepreneur is himself.

Myth 1:Entrepreneurs Are Doers (who does something), Not ThinkersMyth 2:Entrepreneurs Are Born, Not MadeMyth 3:Entrepreneurs Are Always InventorsMyth 4:Entrepreneurs Are Academic and Social MisfitsMyth 5:Entrepreneurs Must Fit the ProfileMyth 6:All Entrepreneurs Need Is MoneyMyth 7:All Entrepreneurs Need Is LuckMyth 8:Ignorance Is Bliss For EntrepreneursMyth 9:Entrepreneurs Seek Success But Experience High Failure RatesMyth 10:Entrepreneurs Are Extreme Risk Takers (Gamblers)

How does Entrepreneur MOVE

Attribute and Characteristics of an EntrepreneurWhat do YOU think!!!Remember At-least THREEWhich All NEXT

Qualities All TogetherClear Vision

OptimisticProactive

Ability to take workStableWell Informed

Love of SuccessHardworkingRisk Taker

General AwarenessDeterminantDecision Maker

Administrative AbilityPublic Relation Flexible

AnalyticalLeadershipAbility to diverse

Innovative Realistic

Good Memory

Reasons for failure

Internal Reasons

External Reasons

Entrepreneur You know!!!

Who is Intrapreneur?

Entrepreneur within an existing organization is INTRAPRENEUR

Who is Manager???

??? in a non-intraprenerial oriented organization is MANAGER

What is Intrapreneurial oriented organizationIts Developing Entrepreneurial CultureWho makes it?

EntrepreneurEntrepreneurIntrapreneurManagerBoth

Intrapreneur (counter part of entrepreneur), meaning "a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation."

Manager (first step into management career), meaning a person responsible for planning and directing the work of a group of individuals, monitoring their work, and taking corrective action when necessary.

Starting a New Venture

New Ideas and Opportunity Recognition Business Planning ProcessIdentifying problems and opportunitiesDefining Business IdeaHow to begin with a low investment

Entrepreneur - XEntrepreneur ThinkingCreativityInnovationPlan your BusinessEntrepreneur -YGeneration of IDEAThinkingFocused Thinking

Individual ThinkingEgoisticOptimisticPessimisticEmotionalRealisticVicious & AggressiveDominating

Entrepreneurial ThinkingIndividual Thinking

(critical)Entrepreneurial Thinking

(focused)Group Thinking

IndividualThinkingParallelThinkingYou AloneYou in a Group

Unstructured thinking process is unfocussed without structure or strategy.

As individuals we are used to this and develop our own habits unconsciously.

Sometimes these are effective, other times not.

What is certain is that when thinking in a group these individual strategies will not tend to converge.

As a result, discussion will tend not to converge due to the factors and reasons discussed in previous slides.

Parallel thinking is associated with a means for groups to think together more effectively, and a means to plan thinking processes in a detailed and cohesive way.Individual Vs Parallel thinking

What is CreativityIt is an essential part of innovation and invention and is important in professions such as business, economics, architecture, industrial design, graphic design, advertising, mathematics, music, art, science and engineering, and teaching.Creativity is a mental and social process involving the generation of new ideas or concepts.

Creativity is the generation of IDEAs that result in the improved efficiency or effectiveness of a system.

Two important aspects of creativity are

ProcessPeople

The Process is goal oriented, it is designed to attain a solution to a Problem.

The People are the resources that determines the Solution.

Therefore Creativity is used to refer to the act of producing new ideas, approaches or actions.

Innovation is the process of both generating and applying such creative ideas in some specific context.Then what is Innovation???creativity by individuals and teams is a starting point for innovation; but innovation is the entire process by which an organization generates new ideas and convert them usefully in commercial products, services and business practices.It resultsIntroduction of a Product/ services in the Market

Bill has led a normal life. That was until the day he destroyed his wifes automatic waffle-maker.

Who is Bill? A regular chap in all senses of the word.A high school track coach, bill liked his job, He loved his wife and insisted that his kids go to Church.

If he wanted anything, he wanted his team to win every time.

He knew they were faster than they were.All they needed were better feet. Or shoes that felt like feet.

One day, a short while later his wife came home and found her husband Bill in his boxers, a crazed look in his eye, melting old bicycle tyres over the stove and squealshing them in her Waffle-maker.

Most other wives would have probably dropped everything and made a run for it. But she knew her Bill.

The stove and waffle-maker succumbed to a painfully slow death. But his team won.

Apparently his boys felt like they were running on air.A few year later, Nike was born.

You know what is Problem Solving and Creative Problem Solving

Problem Solving + Something = Creative Problem Solving

Something IdeaIdea GenerationInnovationCreativityCreative Problem SolvingDeclines with AGEand STAGE,But should be at leastUnlocked.

Business Idea

Innovation,which is feasible to apply or practice and through which profit can be generated.Business Idea is to be adapted only if it is feasible.

Feasible means, feasibility in all directions

FinancialEconomicalTechnicalMarketingMan PowerSociallyLegallyIndustrial Value Chain

Sources of New Idea

ConsumersExisting Product and ServicesDistribution ChannelsGovernmentResearch and Development

Methods of Generating IdeasFocus Groups Group of individuals providing information in a structured format

Brain Storming A group method for obtaining new ideas and solutions

Problem Inventory Analysis A method for obtaining new idea and solution by focusing in problem (s)

Idea GenerationFeasibility StudyBusiness PlanFinal Project Report

Feasibility StudyBusiness PlanStarting the VentureSuccessFailureQuality work offeasibility study andbusiness planPoorGood

Entrepreneurial Opportunity Recognition Process

How to begin with a low Investment

Business Plan Development

Marketing Plan Industry Analysis and market research Developing Marketing Plan

Organizational & Financial Plan Type of ownershipRegistration of BusinessBudgeting and Preparing a Financial statement Analysis of Financial Ratios

Technical, Financial, Marketing, Personnel and Management Feasibility

Financing The venture Estimating and Financing funds requirementSources of Finance: Banks, Venture capitalists SME, SIDB ( Schemes offered by various commercial banks and financial institutions like IDBI, ICICI, SIDBI, SFCs)

A feasibility study is an analysis of the viability of an IDEA through a disciplined and documented process of thinking through the idea from its logical beginning to its logical end.

A feasibility study provides an INVESTIGATING function that helps answer Should we proceed with the proposed project idea? Is it a viable business venture?

A feasibility study should be conducted to determine the viability of an idea BEFORE proceeding with the development of a business.

A Business Plan summarizes the PLAN OF ACTION after a course of action has been determined through the Feasibility Study A Business Plan provides a Planning functionA Business Plan outlines the actions needed to take the proposal from idea to reality A Business Plan tells How your business will be created and Why it will be successfulA Business Plan provides a road map for strategic planning

Provide a thorough examination of all issues and assessment of probability of business successGive focus to the project and outline alternativesNarrow business alternativesSurface new opportunities through the investigative processIdentify reasons NOT to proceedEnhance the probability of success by addressing and mitigating factors early on that could affect the projectProvide quality information for decision makingHelp to increase investment in the companyProvide documentation that the business venture was thoroughly investigatedHelp in securing funding from lending institutions and other monetary sources

Put the Pieces TogetherDo the pieces fit together in a logical manner?Create a Blueprint for ActionFocus Founders and/or Management TeamObtain FinancingAttract Equity InvestmentAttract Key Managers and EmployeesObtain ContractsCreate Joint Ventures, Mergers, Acquisitions

A feasibility study report should be completed in all respective manners, containing detailed analysis of all best possible factors on date.Operational FeasibilityWill it work? how?Technical FeasibilityCan it be built? how?Marketing FeasibilityCan we market the product? how?Economic FeasibilityWill it make economic sense if it works and is built? how? Will it generate profits? how?Financial FeasibilityHow to arrange required fund?

A Business Plan should be brief, concise & straight to the point. Main Requirements May IncludeIndustry DescriptionMarket SizeCustomer BaseCompetitive AdvantageBusiness LocationThree years of Financial ProjectionsMonthly Tracking of First Year FinancialsManagement Experience and ProfilePersonal Statement of AffairsOther Sources of Cash, if any

Feasibility study (after idea generation) answers the bottom line questionIs this venture going to make money?Feasibility study outlines and analyzes several alternatives or methods of achieving business success.Feasibility study is conducted before a business plan.

Business plan is prepared only after the venture has been deemed to be feasible.Business plan deals with only one alternative or scenario that is determined to be the best alternative.Business plan considers the management sidegoals and objectives of the planned business venture.

Contents of Business Plan

Outline of Business Plan

To be prepared in individual or in group (not more than 6)

Report (MS Word, Times New Roman, font size 12, 1.5 spacing) PPT

Executive Summary

Introduction

Background of your Business IdeaGeneral description of the businessIndustry BackgroundPotential of the business and milestones (if any)Forms of Ownership

Mission, Objective, Values and Commitment

Product Description

Products and/or Services you will offerUniqueness of the product or services

Marketing

Target Market (customers) identificationMarket size and trendsCompetitionEstimated market shareMarket Strategy (including promotion, sales and distribution)Pricing

Operations

Identification of locationImplementation ScheduleTimingProcess Flow ChartProximity to suppliesAccess to transportation

Management

Management TeamBOD, Advisor, Consultants

Financial

Profit and loss, Cash flowBreak-even AnalysisCost sheetBudgeting PlanCurrent and Projected financial statements

Critical Risks

Potential ProblemsObstacles and risksAlternative course of action

Harvest Strategy

Transfer of AssetBusiness StrategiesRequired functional StrategiesIdentify Successor (if required)Policies supporting above strategies

Staffing

Resource PlanEmployment Agreement

Appendix

Small Business Management

Registration

Options

Proprietor and ProprietorshipPartners and PartnershipDesignated Partners and LLPDirector and CompanyNGO/ Trust

ProprietorshipPartnershipPrivate LimitedRegistrationMay or May not beShop ActMay or May not beIndian Partnership Act 1932Registrar of firm and chit (Dy Registrar)Must be registeredIndian Companies Act 1956Registrar of companiesProprietor/ Directors12 - 10 (Banking)2 - 20 (Others)2 - 50 (Private Limited)7-onwards (Public Limited)CapitalOwnedContributed on mutual basesShares with legal formalitiesLiabilityPersonal LiabilityUnlimited Liabilityi.e. Personally liabilityExcept LLPLimited liabilityAuditNot necessary if annual sales doesnot exceeds Rs 60 lacsLegal necessityWindupAnytimeAnytime by any of the partnerIt has legal formalities

Kinds of companies

Central Government through Ministry of Corporate Affairs, Company Law Board and Registrar of Companies.

MCA Central Government

Company Law Board :: Four Regional Offices, where Regional Directors are heading at Mumbai, Kolkata, Chennai and Noida.

ROCs :: Generally in each state of India. Appointed by Central Government.

www.mca.gov.in

PrivatePublicMinimum nos of members/ directors27Maximum nos of membersLimited (50)Not limitedCommencement of businessImmediately after getting Certificate of incorporationAfter getting certificate of commencement of businessMembers to transfer sharesRestrictedNotInvitation to public for shares/ debenturesNoYesInvitation to accept depositsOnly members and their relativesOpen to publicIssue of prospectusNeed not to prepare and fileMust be prepared and files with RegistrarStatutory MeetingNot required to holdAfter one month and within six months from the date of obtaining Certificate of commence businessManagerial RemunerationNo limitMax is fixed at 11 % of annual net profitIndex of membersNeed not to keepMust keep if the numbers exceeds fifty

Memorandum of Association Duly Stamped, Signed and witnessed.

Articles of Association Stamped, duly signed by signatories, witnessed.

Agreement which a company proposed to enter into with any individual for appointment of its Whole time director or manager.

A written consent of the Directors Duly signed by each director along with written undertaking by them to take the necessary qualification shares, as provided by Articles. (not for private limited)

Notice of address of the registered office May be filed within 30 days of incorporation.

A statutory declaration stating that all the legal requirements of the Act precedent to incorporation have been complied with. (may be signed by CA, Advocate of Supreme or High court or by a secretary, who is engaged in the formulation of the company)

How to Incorporate a Private Limited Company

Meet all the requirements

Apply for DIN/ (DIN 1) DPIN in case of LLPGet Digital Signature Register Digital SignatureThink for a companys nameCheck its availability in Master Data of companiesPrepare required formalities (as per previous slide)Apply for approval of companys name (form 1A)Apply for companys registration (form 1,18,32)

Steps of LLP formation

Fixed (Indirect/Overheads) are not influenced by the amount produced but can change in the long run e.g., insurance costs, administration, rent, some types of labour costs (salaries), some types of energy costs, equipment and machinery, buildings, advertising and promotion costsVariable (Direct) vary directly with the amount produced, e.g., raw material costs, some direct labour costs, some direct energy costsSemi-fixed where costs not directly attributable to either of the above, for example, some types of energy and labour costs

Total Costs (TC) = Fixed Costs (FC)+ Variable Costs (VC)Average Costs = TC/Output (Q)AC (unit costs) show the amount it costs to produce one unit of output on averageMarginal Costs (MC) the cost of producing one extra or one fewer units of productionMC = TCn TCn-1

Total Revenue also known as turnover, sales revenue or sales = Price x Quantity SoldTR = P x QPrice may be a variety of different prices for different products in the portfolioQuantity could be global sales

Profit () = TR TCNormal Profit the minimum amount required to keep a business in a particular line of productionAbnormal/Supernormal Profit the amount over and above the amount needed to keep a business in its current line of production

Occurs where Total Costs = Total RevenueStart-up costs fixed costsRunning costs variable costsRevenue stream depends on price chargedLow price need to sell more to break-evenHigh price lower level of sales required before breaking even Fixed CostsBreak-Even Point = --------------- Contribution

Provide information for stakeholders customers, shareholders, suppliers, etc.Provides the opportunity for the business to monitor its own activitiesProvides transparency to enable the firm to attract investmentReduces the chance for fraud not 100% successful!!

Shows the flow of sales and costs over a periodShows the level of profit or loss madeShows what has been done with the profit or loss

Sales Revenue70,000- Cost of Goods Sold20,000= Gross Profit50,000- Expenses: Wages30,000 Marketing5,000 Accountant1,000 Loan Interest4,000= Total Expenses40,000= Net Profit10,000

Profit and Loss Account for British Airways plcSource: http://www.bized.ac.uk/cgi-bin/ratios/ratiodata.plTurnover the revenue earned over the yearGross Profit = turnover cost of salesOperating Expenses the fixed costsOperating or Net Profit = Gross profit operating costsCost of Sales the variable costs, how much it cost the firm to produce what it has sold not to be confused with sales revenue!Subtract other costs and expenses incurred to get profit before taxSubtract interest payments/receipts to get profit on ordinary activities before taxSubtract tax due to get profit on ordinary activities after taxFinal section called appropriation account shows where the profit/loss is goingDividend the share of the profit returned to shareholdersRetained Profit the amount kept back for future investment, etc.

A snapshot of the firms position at a point in timeShows what a company owns (assets) and what it owes (liabilities)Balance Sheet shows what assets a company has (use of funds) and where the money came from to acquire those assets (source of funds)

A guide to the structure of the assets of a companyA guide to the level of gearing the ratio of loan to share capitalGives a guide as to the degree of working capital the amount the company has to be able to pay its everyday debts (current assets current liabilities)Shows the total value of a firm at that moment in time

Balance Sheet RatioP&L Ratio or Income/Revenue Statement RatioBalance Sheet and Profit & Loss RatioFinancial RatioOperating RatioComposite RatioCurrent RatioQuick Asset RatioProprietary RatioDebt Equity RatioGross Profit RatioOperating RatioExpense RatioNet profit RatioStock Turnover RatioFixed Asset Turnover Ratio, Return on Total Resources Ratio, Return on Own Funds Ratio, Earning per Share Ratio, Debtors Turnover Ratio,

LIABILITIESASSETSNET WORTH/EQUITY/OWNED FUNDSShare Capital/Partners Capital/Paid up Capital/ Owners FundsReserves ( General, Capital, Revaluation & Other Reserves) Credit Balance in P&L A/cFIXED ASSETS : LAND & BUILDING, PLANT & MACHINERIES Original Value Less DepreciationNet Value or Book Value or Written down valueLONG TERM LIABILITIES/BORROWED FUNDS : Term Loans (Banks & Institutions)Debentures/Bonds, Unsecured Loans, Fixed Deposits, Other Long Term LiabilitiesNON CURRENT ASSETSInvestments in quoted shares & securitiesOld stocks or old/disputed book debtsLong Term Security DepositsOther Misc. assets which are not current or fixed in natureCURRENT LIABILTIESBank Working Capital Limits such as CC/OD/Bills/Export CreditSundry /Trade Creditors/Creditors/Bills Payable, Short duration loans or depositsExpenses payable & provisions against various itemsCURRENT ASSETS : Cash & Bank Balance, Marketable/quoted Govt. or other securities, Book Debts/Sundry Debtors, Bills Receivables, Stocks & inventory (RM,SIP,FG) Stores & Spares, Advance Payment of Taxes, Prepaid expenses, Loans and Advances recoverable within 12 monthsINTANGIBLE ASSETSPatent, Goodwill, Debit balance in P&L A/c, Preliminary or Preoperative expenses

Liabilities have Credit balance and Assets have Debit balanceCurrent Liabilities are those which have either become due for payment or shall fall due for payment within 12 months from the date of Balance SheetCurrent Assets are those which undergo change in their shape/form within 12 months. These are also called Working Capital or Gross Working CapitalNet Worth & Long Term Liabilities are also called Long Term Sources of FundsCurrent Liabilities are known as Short Term Sources of FundsLong Term Liabilities & Short Term Liabilities are also called Outside LiabilitiesCurrent Assets are Short Term Use of Funds

Assets other than Current Assets are Long Term Use of Funds Installments of Term Loan Payable in 12 months are to be taken as Current Liability only for Calculation of Current Ratio & Quick Ratio.If there is profit it shall become part of Net Worth under the head Reserves and if there is loss it will become part of Intangible AssetsInvestments in Govt. Securities to be treated current only if these are marketable and due. Investments in other securities are to be treated Current if they are quoted. Investments in allied/associate/sister units or firms to be treated as Non-current.Bonus Shares as issued by capitalization of General reserves and as such do not affect the Net Worth. With Rights Issue, change takes place in Net Worth and Current Ratio.

Current Ratio : It is the relationship between the current assets and current liabilities of a concern. Current Ratio = Current Assets/Current Liabilities If the Current Assets and Current Liabilities of a concern are Rs.4,00,000 and Rs.2,00,000 respectively, then the Current Ratio will be : Rs.4,00,000/Rs.2,00,000 = 2 : 1 The ideal Current Ratio preferred by Banks is 1.33 : 1

Net Working Capital : This is worked out as surplus of Long Term Sources over Long Tern Uses, alternatively it is the difference of Current Assets and Current Liabilities. NWC = Current Assets Current Liabilities

3. ACID TEST or QUICK RATIO : It is the ratio between Quick Current Assets and Current Liabilities. The should be at least equal to 1.

Quick Current Assets : Cash/Bank Balances + Receivables upto 6 months + Quickly realizable securities such as Govt. Securities or quickly marketable/quoted shares and Bank Fixed Deposits

Acid Test or Quick Ratio = Quick Current Assets/Current Liabilities

Example : Cash 50,000Debtors 1,00,000Inventories 1,50,000 Current Liabilities 1,00,000Total Current Assets 3,00,000

Current Ratio = > 3,00,000/1,00,000 = 3 : 1Quick Ratio = > 1,50,000/1,00,000 = 1.5 : 1

DEBT EQUITY RATIO : It is the relationship between borrowers fund (Debt) and Owners Capital (Equity).

Long Term Outside Liabilities / Tangible Net Worth Liabilities of Long Term Nature

Total of Capital and Reserves & Surplus Less Intangible Assets For instance, if the Firm is having the following :

Capital = Rs. 200 Lacs Free Reserves & Surplus = Rs. 300 Lacs Long Term Loans/Liabilities = Rs. 800 Lacs

Debt Equity Ratio will be => 800/500 i.e. 1.6 : 1

5. PROPRIETARY RATIO : This ratio indicates the extent to which Tangible Assets are financed by Owners Fund.Proprietary Ratio = (Tangible Net Worth/Total Tangible Assets) x 100 The ratio will be 100% when there is no Borrowing for purchasing of Assets.

6. GROSS PROFIT RATIO : By comparing Gross Profit percentage to Net Sales we can arrive at the Gross Profit Ratio which indicates the manufacturing efficiency as well as the pricing policy of the concern.

Gross Profit Ratio = (Gross Profit / Net Sales ) x 100

Alternatively , since Gross Profit is equal to Sales minus Cost of Goods Sold, it can also be interpreted as below : Gross Profit Ratio = [ (Sales Cost of goods sold)/ Net Sales] x 100 A higher Gross Profit Ratio indicates efficiency in production of the unit.

7. OPERATING PROFIT RATIO : It is expressed as => (Operating Profit / Net Sales ) x 100

Higher the ratio indicates operational efficiency

NET PROFIT RATIO :

It is expressed as => ( Net Profit / Net Sales ) x 100

It measures overall profitability.

9. STOCK/INVENTORY TURNOVER RATIO :

(Average Inventory/Sales) x 365 for days (Average Inventory/Sales) x 52 for weeks (Average Inventory/Sales) x 12 for months

Average Inventory or Stocks = (Opening Stock + Closing Stock) ----------------------------------------- 2 . This ratio indicates the number of times the inventory is rotated during the relevant accounting period

10. DEBTORS TURNOVER RATIO : This is also called Debtors Velocity or Average Collection Period or Period of Credit given .

(Average Debtors/Sales ) x 365 for days (52 for weeks & 12 for months)

11. ASSET TRUNOVER RATIO : Net Sales/Tangible Assets

12. FIXED ASSET TURNOVER RATIO : Net Sales /Fixed Assets

13. CURRENT ASSET TURNOVER RATIO : Net Sales / Current Assets

14. CREDITORS TURNOVER RATIO : This is also called Creditors Velocity Ratio, which determines the creditor payment period.

(Average Creditors/Purchases)x365 for days (52 for weeks & 12 for months)

15. RETURN ON ASSETS : Net Profit after Taxes/Total Assets 16. RETURN ON CAPITAL EMPLOYED :

( Net Profit before Interest & Tax / Average Capital Employed) x 100 Average Capital Employed is the average of the equity share capital and long term funds provided by the owners and the creditors of the firm at the beginning and end of the accounting period.

Composite Ratio

17. RETURN ON EQUITY CAPITAL (ROE) : Net Profit after Taxes / Tangible Net Worth

EARNING PER SHARE : EPS indicates the quantum of net profit of the year that would be ranking for dividend for each share of the company being held by the equity share holders.

Net profit after Taxes and Preference Dividend/ No. of Equity Shares

19. PRICE EARNING RATIO : PE Ratio indicates the number of times the Earning Per Share is covered by its market price.

Market Price Per Equity Share/Earning Per Share

20. DEBT SERVICE COVERAGE RATIO : This ratio is one of the most important one which indicates the ability of an enterprise to meet its liabilities by way of payment of installments of Term Loans and Interest thereon from out of the cash accruals and forms the basis for fixation of the repayment schedule in respect of the Term Loans raised for a project. (The Ideal DSCR Ratio is considered to be 2 )

PAT + Depr. + Annual Interest on Long Term Loans & Liabilities --------------------------------------------------------------------------------- Annual interest on Long Term Loans & Liabilities + Annual Installments payable on Long Term Loans & Liabilities ( Where PAT is Profit after Tax and Depr. is Depreciation)

ENTREPRENEURIAL FINANCE

Long term equity financeInvesting as opposed to banks who lendLooking for high gainsAccepting high risksCan be involved in management of the invested firmVenture capital investment is illiquid

Mostly fundsCharge about 2% + success fee

Also companies

Limited partnerships

No fixed expense of debt servicing

Financial flexibility

Sharing of risk

Value added investingAttracting talentNetworking with service providers/suppliersAccessing markets

Enhanced credibility with lenders

Dilution of shareholdingIncreased 3rd party governanceIncreased controlsIncreased commitment to stated strategy

Early stage financingSeed capital or pre-start up or R&D Start up financingSecond round financing

Later stage financingExpansionReplacementTurnaround

Get rid of scamstersHygiene factors beware of things that can shut down a businessGrowth & industry considerationsDue diligence- Physical evaluation- Calling in the expertsMonetize value

Amount and terms of investment. Dividend policy. Composition of the board of directors. Reporting - management reports, monthly accounts, annual budgets. Liquidity (exit) plans. Rights of sale Warranties. Matters requiring venture capitalist approval

Locating playersConcerns regarding exchange of infoLarger companies look equally attractive with lesser riskEven listed securities are giving great returns

Financial Institutes

Banks

Collateral (Security/ Guarantee)Internal incl. a/c receivableExternalPersonal guaranteesDebt covenants (Agreement/ Contract)Short maturity debt

Complete paperwork in time Submit financial statements as scheduledRoute all transactions through bankAsk for extras free drafts, alerts, etcExude confidence and well beingTransmit good newsBe proactive about inspections

Can result form unplanned successIs usually due to lack of planning or tardiness in collectionsDissatisfaction among suppliersHigher costsLower qualityDissatisfied (worried) employeesHigh bad debts migration of customers

Entrepreneurship Development and Government

Role of Central Government and State Government in promoting Entrepreneurship - Introduction to various incentives, subsidies and grants - Export Oriented Units Fiscal and Tax concessions availableRole of following agencies in the Entrepreneurship Development District Industries Centers (DIC), Small Industries Service Institute (SISI), Entrepreneurship Development Institute of India (EDII),National Institute of Entrepreneurship & Small Business Development (NIESBUD), National Entrepreneurship Development Board (NEDB).

Important Websites from GoI

Ministry of FinanceMinistry of Commerce and IndustryMinistry of MSMEMinistry of Corporate Affairs

www. commerce.nic.in

www.msme.gov.in

www.mca.gov.in

District Industries Centers (DIC)

2. Small Industries Service Institute (SISI)

3. Entrepreneurship Development Institute of India (EDII)

4. National Institute of Entrepreneurship & Small Business Development (NIESBUD)

5. National Entrepreneurship Development Board (NEDB)

Role of Business IncubatorWhat is Business Incubator?

2. Why we need them?

EntrepreneurJust born BabyIncubatorBusiness IncubatorIncubatorIncubatee

Developing Profitable Enterprises.

Create Jobs

Raise the awareness of Potential Entrepreneurs.

Create ecosystem conducive for entrepreneurship.

Success measures number of companies incubated and their being successful.Objectives of these IncubatorsNature of these IncubatorsNGO Government financedPrivate Self financed

ICT (Information and Communication Technology) services Office space Shared workshops Financial management/accounting services Linkages to financiers, Loan and Loan guaranteeIncubation and Business Development: Business information Business management and development advisory services Incubation program for non-resident clients (virtual incubation) Incubation program for resident clients Mentoring/coaching and mentoring Pre-incubation services International Business Services: Help entering particular markets Networks and Synergy: Networking events Referrals to business professionals Technology Transfer: Help with commercializing technology Help with intellectual property/patent advice

Other: Facilities also includes shared resources. Strong support for access to business network, Angel/ VC/ Loan funding. Facilities Provided by Incubators

Some Business Incubators in India

NamePlaceWebsiteSociety for Innovation and Entrepreneurship (SINE) IIT Bombaywww.sineiitb.org Technology Business Incubator (TBI) IIT Delhiwww.fitt-iitd.org Rural Technology and Business Incubator (RTBI) IIT Chennaiwww.rtbi.inTiruchirappalli National Institute of Technology- Science & Technology Entrepreneurs Park (TREC-STEP) NITTamilnaduwww.trecstep.comScience and Technology Entrepreneurship Park (STEP)JSSATE Noidawww.jssstepnoida.org PSG Science and Technology Entrepreneurship Park (PSG-STEP)PSG Coimbatorewww.psgstep.comIndiaCo Centre (for profit)Punewww.indiaco.com

CFC (Common facility Centre)

GOI ---- Sfurti Scheme --- To Develop Cluster

Through NIESBUD, NoidaNIMSME, HydrabadIIE, GuwahatiEDI, AhemdabadVarious NGOsExample Firozabad BanglesMuradabad BrassPilakhwa TextileMeerut Sport goodsSaharanpur WoodenKhurja CeramicAgra PethaChamoli Bee Keeping

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