Prior to beginning work on this discussion forum, read Unit 3: Securing Capital from the course textbook Entrepreneurship: Starting and Operating a Small Business. Frame your reading with the view that financial considerations frame all significant entrepreneurial activities and decisions, and the balance sheet is a rich source of information needed to inform significant business decisions and identify significant risks.
We can analyze a balance sheet to determine how a business is financed, and this analysis enables us to draw conclusions about risks we have because of the capital structure developed from choices about debt and equity financing.
Analyze the spreadsheet Balance Sheet and create an initial discussion post that addresses the following:
- What conclusions about how the business is financed can be drawn from the composition of the organization’s capital?
- Based upon the defined capital structure, assess the risks facing the entrepreneur responsible for this business because of the capital structure.
- What can one conclude about the business’s financing based on the composition of the organization’s capital?
To aid your analysis of capital structure, access the balance sheet for this discussion, and compute the debt to equity ratio as follows:
- Add (current portion of long-term debt) + (long-term debt net of current portion) to obtain long-term debt.
- Debt-to-equity ratio = Long-term debt/total shareholders’ equity.
- Use the computed ratio to respond to the above questions.
Offer a link to a video or an article that supports your analysis and conclusions.