MBA Mondays - Leanpub

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MBA Mondays Fred Wilson

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TABLE OF CONTENTS

Preface

1

ROI and Net Present Value

3

How to Calculate a Return on Investment

3

The Present Value of Future Cash Flows The Time Value of Money Compounding Interest

7 11

Corporate Entities Corporate Entities

Accounting

19

21

21

The Profit and Loss Statement The Balance Sheet Cash Flow

15

15

Piercing the Corporate Veil

Accounting

5

24

28

34

Analyzing Financial Statements

38

Business, Metrics and Pricing Key Business Metrics

43

43

Price: Why Lower Isn't Always Better

45

Projections, Budgeting and Forecasting Projections, Budgeting and Forecasting Scenarios

49

47

47

Budgeting in a Small Early Stage Company Budgeting in a Growing Company

55

Budgeting in a Large Company Forecasting

58

60

Risk and Return Risk and Return

63

63

Diversification Hedging

65

68

Currency Risk in a Business

70

Purchasing Power Parity

73

Business Costs

77

Opportunity Costs Sunk Costs

77

78

Off Balance Sheet Liabilities

Valuation

80

83

Enterprise Value and Market Value Bookings Vs. Revenues Vs. Collections

Commission Plans Commission Plans

What a CEO Does

95

91

91

What a CEO Does, Continued

Outsourcing

87

87

What a CEO Does

Outsourcing

52

95

92

83 85

Outsourcing Vs. Offshoring

97

Employee Equity

101

Employee Equity

101

Employee Equity: Dilution

103

Employee Equity: Appreciation Employee Equity: Options

106

107

Employee Equity: The Liquidation Overhang Employee Equity: The Option Strike Price Employee Equity: Restricted Stock and RSUs Employee Equity: Vesting

M&A Fundamentals

128

Buying and Selling Assets

117

122

Mergers and Acquisitions 127

114

119

Employee Equity: How Much?

Acquisition Finance

111

130

127

Preface 1

MBA Mondays is written by Fred Wilson , and licensed under the 2 Creative Commons Attribution 3.0 license. For details, see this post .

1

http://www.avc.com/a_vc/about.html http://www.avc.com/a_vc/2011/02/mba-mondays-everywhere.html

2

ROI and Net Present Value

How to Calculate a Return on Investment 1

The Gotham Gal and I make a fair number of non-tech angel investments. Things like media, food products, restaurants, music, local real estate, local businesses. In these investments we are usually backing an entrepreneur we've gotten to know who delivers products to the market that we use and love. The Gotham Gal runs this part of our investment portfolio with some involvement by me. As I look over the business plans and projections that these entrepreneurs share with us, one thing I constantly see is a lack of sophistication in calculating the investor's retu