Hey everyone,
This week's post is dedicated to our weekly reading reflections. This reflection comes out of Chapter 11 of our Entrepreneurship textbook written by Donald F. Kuratko. The title of this chapter is "Financial Preparation for Entrepreneurial Ventures" and deals with a lot of accounting principles and numbers.
Although nothing "surprised" me in this reading, there were a few terms and concepts that I was unfamiliar with. These terms included: Internal Rate of Return, Pro Forma Statements, Capital Budgeting, and the Payback Method. I have only taken a couple accounting classes thus far, so I am sure that I will be very familiar with these terms sooner than later. However, as of now I am very unfamiliar with these terms in regards to the financial side of a venture.
One of the concepts that I thought was particularly confusing was Capital Budgeting. This is most likely due to the fact that I have not covered this topic yet, and on top of that, it is a computational concept. Table 11.11 on page 358 was also particularly confusing, and although I do understand what it is trying to accomplish, the mathematical side had me baffled.
Two Questions that I would like to ask the author:
1. When preparing a capital budget, what is the most influential factor to let one know when budgeting for a for a certain venture?
2. Why is it necessary to use the IRR method if the NPV is so similar and effective?
Finally, there is not really anything that I disagreed with in this section. Once again, Kuratko's writing is so objective that there is nothing I can really disagree with.
Until next time,
-Bryce
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