_0cf62d27c5494f1787f890565148e71b_EDM_Module_–_4__Financing_and_Managing_New_Venture.pdf

Accounting and finance

1. Entrepreneurship Development & Management (CP-
103)
Module –4 : Financing and Managing New Venture
Topics:
1.SourcesofCapital
2.RecordKeepingofFinancialControl
3.MarketingandSalesControl
4.InternetAdvertising
5.FeaturesandEvaluationofJointVenture

2. Entrepreneurship Development & Management (CP-
103)
Module –4 : Financing and Managing New Venture
Topic: Sources of Capital

3. Sources of Capital
Internal Sources of Capital
Internal sources of capital are funds generated within the organization. These are typically preferred due to
their cost-effectiveness and lesser risk.
1.Retained Earnings:Retained earnings are the portion of net income that is not distributed as dividends to
shareholders but reinvested in the business. This source of capital is advantageous because it does not
incur additional debt or equity dilution. Companies often use retained earnings for expansion, research
and development, and debt repayment.
2.Depreciation Funds:Depreciation is a non-cash expense that reduces the book value of assets due to
wear and tear over time. Although it does not provide cash, the allocation of depreciation expenses can
create a cash reserve. This reserve can be used for reinvestment or replacing old assets.
3.Sale of Assets:Selling non-core or obsolete assets can generate capital. This method is beneficial for
businesses that need quick liquidity without increasing liabilities or affecting equity.
4.Reduction in Working Capital:Efficient management of working capital (current assets minus current
liabilities) can free up funds. For example, reducing inventory levels, speeding up receivables, and
delaying payables can improve liquidity and provide additional capital.

4. Sources of Capital
External Sources of Capital
External sources involve funds raised from outside the organization. These can be classified into
equity financing and debt financing.
Equity Financing:
1.Issuing Shares:Companies can raise capital by issuing new shares. This can be done through
an Initial Public Offering (IPO) for public companies or private placements for private
companies. While this method increases capital without incurring debt, it dilutes ownership
and control.
2.Venture Capital:Venture capitalists provide funding to startups and early-stage companies
with high growth potential in exchange for equity. This source of capital is significant for
innovative businesses that may not qualify for traditional financing. Venture capitalists also
bring expertise and networking opportunities.

5. Sources of Capital
External Sources of Capital
External sources involve funds raised from outside the organization. These can
be classified into equity financing and debt financing.
Equity Financing:
3. Angel Investors:Angel investors are wealthy individuals who invest personal funds in startups,
typically during the early stages. They often provide not only capital but also mentorship and
industry connections. The terms of investment are usually more flexible than those of venture
capitalists.
4. Crowdfunding:Crowdfunding platforms like Kickstarter and Indiegogo allow businesses to
raise small amounts of capital from a large number of people, usually via the internet. This
source is beneficial for consumer-oriented products and can also serve as a marketing tool.

6. Sources of Capital
External Sources of Capital
Debt Financing:
1.Bank Loans:Banks provide various loan products, including term loans and
working capital loans. Term loans are repaid over a fixed period with regular
installments, while working capital loans are used to finance daily operations.
Bank loans require collateral and involve interest payments, but they do not
dilute ownership.
2.Bonds:Companies can issue bonds to raise capital. Bonds are debt securities
that pay periodic interest and return the principal at maturity. This method is
suitable for large, stable companies with good credit ratings. It allows
companies to raise significant funds without diluting ownership.

7. Sources of Capital
External Sources of Capital
Debt Financing:
3.TradeCredit:Tradecreditisanarrangementwheresuppliersallowbusinesses
topurchasegoodsorservicesoncredit,deferringpaymenttoalaterdate.This
sourceofcapitalisparticularlyusefulformanagingshort-termfinancingneeds.
4.Leasing:Leasinginvolvesrentingequipmentorpropertyratherthan
purchasingitoutright.Thisallowsbusinessestouseassetswithoutthelarge
upfrontcosts,freeingupcapitalforotheruses.Leasingagreementscanbe
operatingleasesorfinanceleases,eachwithdifferentaccountingandtax
implications.

8. Sources of Capital
Factors Influencing the Choice of Capital
1.CostofCapital:Thecostassociatedwithraisingcapital,includinginterestrates
fordebtandexpectedreturnsforequityinvestors,isacriticalconsideration.
Companiesaimtominimizetheoverallcostofcapital.
2.Control:Equityfinancingcandiluteownershipandcontrol,whiledebtfinancing
doesnot.Companiesmustbalancetheneedforcapitalwiththedesiretoretain
control.
3.Risk:Debtincreasesfinancialriskduetofixedinterestobligations,whileequity
doesnotrequirerepayment.Companieswithunstablecashflowsmayprefer
equitytoavoidtheriskofinsolvency.

9. Sources of Capital
Factors Influencing the Choice of Capital
4.Flexibility:Somesourcesofcapital,likeretainedearningsandtradecredit,
offermoreflexibilitycomparedtostructuredproductslikebondsandloans,which
comewithstricttermsandconditions.
5.MarketConditions:Prevailingmarketconditions,suchasinterestratesand
investorsentiment,canimpacttheavailabilityandcostofcapital.Companies
mustadapttheirstrategiestothecurrentfinancialenvironment.
6.Company’sFinancialHealth:Acompany’screditrating,profitability,andcash
flowstabilityinfluenceitsabilitytoaccessdifferentsourcesofcapital.Strong
financialhealthgenerallyprovidesmoreoptionsandbetterterms.

10. Entrepreneurship Development & Management (CP-
103)
Module –4 : Financing and Managing New Venture
Topic: Record Keeping of Financial Control

11. Record Keeping of Financial Control
Record keeping involves the systematic documentation and management of all financial
transactions and business activities.
This process encompasses the recording of income, expenses, assets, liabilities, and equity.
Proper record keeping is fundamental for creating accurate financial statements, such as
the balance sheet, income statement, and cash flow statement, which are essential for
assessing an organization's financial performance and position.
Legal and Regulatory Compliance
One of the primary reasons for maintaining thorough records is to comply with legal and
regulatory requirements. Businesses are obligated to keep records for tax purposes and to
demonstrate transparency and accountability.

12. Record Keeping of Financial Control
InternalControlsandFraudPrevention
Recordkeepingservesasacornerstoneofinternalcontrols,whichareproceduresand
mechanismsimplementedtosafeguardassets,ensuretheaccuracyoffinancial
information,andpreventfraud.Bymaintainingdetailedandaccuraterecords,businesses
canmonitorfinancialtransactions,identifydiscrepancies,anddetectfraudulentactivities.
Internalaudits,facilitatedbycomprehensiverecords,helpverifytheintegrityoffinancial
informationandoperationalcompliance.
FinancialPlanningandAnalysis
Accuraterecordkeepingprovidesawealthofdataforfinancialplanningandanalysis.
Historicalfinancialrecordsofferinsightsintospendingpatterns,revenuetrends,andcost
structures,enablingmanagerstoforecastfuturefinancialperformanceandmakeinformed
decisions.Budgeting,cashflowmanagement,andfinancialforecastingareallrelianton
preciseandaccessiblefinancialrecords.Moreover,thisinformationiscriticalfor
conductingfinancialratioanalysis,benchmarking,andperformanceevaluations.

13. Record Keeping of Financial Control
DecisionMakingandStrategicPlanning
Intherealmofstrategicplanning,robustfinancialrecordsareindispensable.Theyprovide
theempiricaldataneededtoevaluatethefeasibilityofnewprojects,investments,or
businessexpansions.Forinstance,whenconsideringamergeroracquisition,accurate
financialrecordsofbothentitiesarescrutinizedtoassessfinancialhealthandcompatibility.
Inessence,recordkeepinginformsstrategicdecisions,helpingbusinessesaligntheir
financialstrategieswiththeirlong-termgoals.
EfficiencyandOperationalManagement
Effectiverecordkeepingstreamlinesbusinessoperationsbyprovidingaclearandorganized
financialhistory.Thisfacilitatessmoothday-to-dayoperations,suchasmanagingpayroll,
payingbills,andhandlingcustomerinvoices.Italsoenhancesefficiencyinfinancial
reportingandauditingprocesses,reducingthetimeandeffortrequiredtoretrieveand
verifyfinancialinformation.

14. Record Keeping of Financial Control
Principles
Accuracy and Completeness
The foremost principle is ensuring that all financial records are accurate and complete.
Accuracy involves recording transactions precisely as they occur, without errors or
omissions. Completeness means that all transactions, including revenues, expenses, assets,
and liabilities, are documented. Inaccurate or incomplete records can lead to misinformed
decisions, financial discrepancies, and legal issues.
Timeliness
Timely record keeping is crucial for maintaining an up-to-date view of an organization's
financial health. Transactions should be recorded as soon as they occur to avoid backlogs
and ensure that financial statements reflect the most current information. This practice
helps in monitoring cash flows, managing budgets, and identifying potential financial
problems early.

15. Record Keeping of Financial Control
Principles
Consistency
Consistency in record keeping refers to applying the same accounting methods and
principles over time. This principle ensures that financial data is comparable across
different periods, facilitating trend analysis and performance evaluation. It also simplifies
the auditing process and enhances the credibility of financial reports.
Security and Confidentiality
Protecting the security and confidentiality of financial records is paramount. Access to
records should be restricted to authorized personnel only, and robust systems should be in
place to prevent unauthorized access, data breaches, and fraud. This principle not only
safeguards sensitive information but also complies with data protection regulations.

16. Record Keeping of Financial Control
Principles
Classification and Organization
Proper classification and organization of records are essential for efficient retrieval and
analysis. Transactions should be categorized systematically, often using a chart of accounts,
which groups similar items together (e.g., assets, liabilities, equity, revenues, and
expenses). Well-organized records facilitate accurate reporting, auditing, and financial
analysis.
Compliance with Standards and Regulations
Financial record keeping must comply with generally accepted accounting principles (GAAP)
or international financial reporting standards (IFRS), as well as local laws and regulations.
Adherence to these standards ensures consistency, fairness, and transparency in financial
reporting, and helps avoid legal penalties and fines.

17. Record Keeping of Financial Control
Principles
Regular Reconciliation
Regular reconciliation of accounts ensures that the recorded transactions match the actual
financial activities. For example, bank statements should be regularly reconciled with the
organization's cash records. This practice helps in identifying and rectifying discrepancies,
errors, or fraudulent activities promptly.
Audit Trail
Maintaining a clear audit trail is critical for transparency and accountability. An audit trail
documents the sequence of activities and changes made to financial records, providing a
detailed history that auditors can review. This practice not only supports internal controls
but also aids in detecting and investigating discrepancies or irregularities.

18. Entrepreneurship Development & Management (CP-
103)
Module –4 : Financing and Managing New Venture
Topic: Marketing and Sales Control

19. Entrepreneurship Development & Management (CP-
103)
Module –4 : Financing and Managing New Venture
Topic: Marketing and Sales Control

20. Marketing and Sales Control
Importance of Marketing and Sales Control
For new ventures, where resources are often limited, and the margin for error is
small, marketing and sales control are essential for several reasons:
1.Resource Optimization: Ensures efficient use of limited financial and human
resources.
2.Goal Alignment: Aligns marketing and sales activities with overall business
objectives.
3.Performance Tracking: Provides a mechanism to measure performance and identify
areas for improvement.
4.Risk Management: Helps in identifying potential risks and taking corrective actions
promptly.
5.Adaptability: Allows the venture to remain agile and responsive to market changes.

21. Marketing and Sales Control
Key Components of Marketing and Sales Control
1. Setting Clear Objectives
The first step in marketing and sales control is to establish clear, measurable
objectives. These objectives should be aligned with the overall business goals and
should be specific, measurable, achievable, relevant, and time-bound (SMART). For
example, a new venture might set an objective to achieve a 10% market share within
the first year.
2. Developing a Marketing and Sales Plan
A well-defined marketing and sales plan serves as a roadmap for achieving the set
objectives. This plan should outline the target market, value proposition, marketing
mix (product, price, place, promotion), and sales strategy. It should also include a
timeline and budget to ensure that resources are allocated effectively.

22. Marketing and Sales Control
Key Components of Marketing and Sales Control
3. Implementing Control Mechanisms
To ensure that marketing and sales activities stay on track, it is crucial to implement
control mechanisms. These can include:
•Key Performance Indicators (KPIs): Metrics such as sales volume, market share,
customer acquisition cost, and customer lifetime value help measure performance.
•Regular Monitoring and Reporting: Regularly tracking performance against KPIs and
reporting findings helps in making informed decisions.
•Sales Quotas and Targets: Setting specific sales targets for the sales team ensures
accountability and provides motivation.

23. Marketing and Sales Control
KeyComponentsofMarketingandSalesControl
4.MarketResearchandFeedback
Continuousmarketresearchisvitalforunderstandingcustomerneeds,markettrends,
andcompetitivelandscape.Additionally,establishingfeedbackloopswithcustomers
andsalesteamshelpsgathervaluableinsightsandmakenecessaryadjustmentstothe
marketingandsalesstrategies.
5.TechnologyandTools
Leveragingtechnologycansignificantlyenhancemarketingandsalescontrol.
CustomerRelationshipManagement(CRM)systems,marketingautomationtools,and
analyticsplatformsprovidereal-timedataandinsights,streamlineprocesses,and
improvedecision-making.

24. Marketing and Sales Control
Key Components of Marketing and Sales Control
6. Training and Development
Investing in the training and development of the sales and marketing teams is crucial.
Well-trained teams are better equipped to execute strategies effectively, adapt to
changes, and deliver desired results.
7. Continuous Improvement
Marketing and sales control is not a one-time activity but an ongoing process.
Regularly reviewing performance, identifying areas for improvement, and
implementing changes is essential for continuous growth and success. This iterative
process ensures that the venture remains competitive and can adapt to evolving
market conditions.

25. Entrepreneurship Development & Management (CP-
103)
Module –4 : Financing and Managing New Venture
Topic: Internet Advertising

26. Internet Advertising
Introduction
Intheeraofdigitaltransformation,internetadvertisinghasbecomeacornerstoneof
marketingstrategiesforbusinessesacrosstheglobe.Unliketraditionaladvertising
mediums,theinternetoffersunparalleledreach,targetingcapabilities,andmeasurable
results.
EvolutionofInternetAdvertising
Internetadvertisinghascomealongwaysincethefirstclickablebanneradappearedin
1994.Theearlydayswerecharacterizedbystaticbanneradsandsimplepop-ups.As
technologyadvanced,sodidadvertisingtechniques.TheintroductionofGoogleAdWords
in2000revolutionizedtheindustrywithpay-per-click(PPC)models,allowingadvertisers
topayonlywhenusersinteractedwiththeirads.SocialmediaplatformslikeFacebook
andInstagramfurthertransformedthelandscapebyofferinghighlytargetedadvertising
optionsbasedonuserdemographics,interests,andbehaviors.

27. Internet Advertising
Key Components of Internet Advertising
1.SearchEngineMarketing(SEM):SEMinvolvespromotingwebsitesbyincreasingtheir
visibilityinsearchengineresultspages(SERPs)throughpaidadvertising.GoogleAdsisa
primeexample,enablingbusinessestobidonkeywordsrelevanttotheirproductsor
services.
2.SocialMediaAdvertising:PlatformslikeFacebook,Instagram,Twitter,andLinkedIn
offerrobustadvertisingsolutionsthatallowbusinessestotargetspecificaudiencesbased
onvariouscriteriasuchasage,location,interests,andonlinebehavior.
3.DisplayAdvertising:Thisinvolvesplacingvisualadsonwebsites,apps,orsocialmedia
throughnetworkslikeGoogleDisplayNetwork.Displayadscanbestaticimages,videos,
orinteractiveelements.

28. Internet Advertising
Key Components of Internet Advertising
4.Email Marketing: Despite being one of the oldest forms of digital marketing, email
advertising remains effective. It involves sending promotional messages to a targeted
list of recipients who have opted-in to receive communications.
5.Affiliate Marketing: This performance-based marketing model rewards affiliates for
driving traffic or sales to a business’s website through their promotional efforts.
6.Influencer Marketing: Leveraging individuals with significant online followings to
promote products or services can be highly effective, especially in niches like beauty,
fashion, and tech.

29. Internet Advertising
Benefits of Internet Advertising
1.TargetedReach:Internetadvertisingallowsforprecisetargetingbasedon
demographics,location,interests,andbehavior,ensuringthatadsreachthemost
relevantaudiences.
2.Cost-Effectiveness:WithoptionslikePPC,advertisersonlypaywhenusersengagewith
theirads,makingitacost-efficientmethodcomparedtotraditionaladvertising.
3.MeasurableResults:Digitalplatformsprovidedetailedanalyticsandreporting,
enablingadvertiserstotrackperformanceandoptimizecampaignsinrealtime.
4.FlexibilityandScalability:Internetadvertisingcampaignscanbeadjustedquicklyin
responsetomarketconditionsorperformancedata,andscaledupordownbasedon
budgetandobjectives.

30. Internet Advertising
Challenges in Internet Advertising
1.AdBlockers:Theriseofad-blockingsoftwareposesasignificantchallenge,asitreduces
thereachofonlineads.
2.PrivacyConcerns:IncreasingconcernsoverdataprivacyandregulationslikeGDPRand
CCPArequireadvertiserstobemorecautiousinhowtheycollectanduseconsumerdata.
3.BannerBlindness:Usershavebecomeadeptatignoringbannerads,makingitharder
tocapturetheirattention.
4.CompetitiveLandscape:Theeaseofentryintointernetadvertisingmeansthatthe
spaceishighlycompetitive,requiringconstantinnovationandoptimization.

31. Internet Advertising
Future Trends
1.ArtificialIntelligence(AI)andMachineLearning:AIandmachinelearningare
enhancingtargetingandpersonalization,makingadsmorerelevantandeffective.
2.VoiceSearchandSmartSpeakers:Asvoice-activateddevicesbecomemoreprevalent,
optimizingadsforvoicesearchisemergingasanewfrontier.
3.ProgrammaticAdvertising:Automatedadbuyingisbecomingmoresophisticated,
allowingformoreefficientandtargetedadplacements.
4.InteractiveandVideoContent:Engagingformatslikeinteractiveadsandvideocontent
aregainingtraction,offeringricheruserexperiences.

32. Features and Evaluation of Joint Venture
Introduction
AJointVenture(JV)isastrategicpartnershipwheretwoormorepartiescometogether
toachieveaspecificobjectivewhilesharingresources,risks,andrewards.These
partnershipscanbeformedbetweencompanies,governments,orindividuals,aimingto
leveragetheuniquestrengthsandcapabilitiesofeachparticipant.Jointventuresare
particularlypopularinindustriesrequiringsignificantcapitalinvestment,innovation,or
accesstonewmarkets.
Key Features of Joint Ventures
1.SharedObjectivesandGoals:Jointventuresareestablishedwithaclear,mutual
objectivethatallpartiesagreeupon.Thiscouldbeanythingfromenteringanew
market,developingnewproducts,orleveragingcombinedresourcesforcompetitive
advantage.

33. Features and Evaluation of Joint Venture
Key Features of Joint Ventures
2.Shared Investment and Risk: All parties in a joint venture contribute resources,
which can include capital, technology, intellectual property, or labor.
Correspondingly, they also share the risks involved in the venture, which mitigates
individual exposure to potential losses.
3.Separate Legal Entity: Many joint ventures are structured as separate legal entities,
such as corporations or limited liability companies. This provides a clear
demarcation between the JV's activities and the individual businesses of the
partners, protecting each party's existing operations from liabilities associated with
the JV.
4.Duration and Scope: Joint ventures can be temporary or long-term, depending on
the project's nature and the goals of the parties involved. The scope is also clearly
defined, outlining the boundaries within which the JV will operate.

34. Features and Evaluation of Joint Venture
Key Features of Joint Ventures
5.Management and Control: Control and management of a JV are typically shared
among the partners. This can take various forms, such as a joint management
committee or appointed executives from each partner. Decision-making processes
and governance structures are established to ensure balanced control.
6.Profit and Loss Sharing: The profits and losses of a joint venture are shared among
the partners in proportion to their investment or as agreed upon in the JV
agreement. This alignment of financial outcomes ensures that all parties remain
committed to the JV's success.

35. Features and Evaluation of Joint Venture
Evaluation of Joint Ventures
1.StrategicAlignment:ThefirststepinevaluatingaJVisassessingthestrategic
alignmentbetweenthepartners.Thisincludesevaluatingwhetherthejointventure's
objectivesalignwitheachpartner’slong-termstrategicgoalsandcorecompetencies.
2.MarketPotential:Anin-depthanalysisofthemarketpotentialfortheJV’sproductsor
servicesiscrucial.Thisincludesunderstandingmarketdemand,competitivelandscape,
andpotentialbarrierstoentry.Astrongmarketpotentialjustifiestheinvestmentand
effortrequiredfortheJV.
3.FinancialViability:FinancialprojectionsandviabilityarecriticalcomponentsofJV
evaluation.Thisinvolvesanalyzingexpectedrevenues,costs,investmentrequirements,
andtheoverallfinancialhealthoftheJV.Financialmodelsandsensitivityanalysesare
usedtoprojectvariousscenariosandtheirimpactsonprofitability.

36. Features and Evaluation of Joint Venture
Evaluation of Joint Ventures
4.Partner Capabilities and Resources: Evaluating the capabilities and resources each
partner brings to the table is essential. This includes financial strength, technological
expertise, market knowledge, and human resources. The complementary strengths
of partners can significantly enhance the JV’s success prospects.
5.Risk Assessment and Mitigation: Identifying and assessing risks associated with the
joint venture is crucial. These risks can be operational, financial, regulatory, or
market-related. Developing risk mitigation strategies and contingency plans is vital
to manage uncertainties.

37. Features and Evaluation of Joint Venture
Evaluation of Joint Ventures
6.Legal and Regulatory Considerations: Understanding the legal and regulatory
environment in which the JV will operate is necessary. This includes compliance with
local laws, intellectual property rights, and any potential antitrust issues. Legal due
diligence ensures the JV operates within the legal framework and protects the
interests of all partners.
7.Performance Metrics and Monitoring: Establishing clear performance metrics and
monitoring mechanisms is essential for evaluating the JV’s progress. Regular
performance reviews and audits help ensure that the JV stays on track to achieve its
objectives and allows for timely corrective actions if needed.