Entrepreneurial Finance is about the use and acquisition of capital, among other things by young innovative companies. A company is focused on creating, delivering and collecting value. In entrepreneurial finance, this process is approached from accounting and finance; the differences between these perspectives focus mainly on value. In accounting, value is based on the price paid. In the financing, value is the present value of the (uncertain) future cash flows. Value creation has different dimensions that are studied from different perspectives – often separately. Two important aspects are the way in which investments are made and the method of financing. How can it be determined whether an intended investment is financially attractive? How are the relevant cash flows of an investment calculated? How does the company deal with uncertainty? The financing focuses on different types of assets and their capital costs, capital structure and the contractual relationship with the private equity investor.
Goals(s) of the course:
Gain insight into various dimensions of value and the aspects that play a role in the valuation of an investment, share, or of the company as a whole. Being able to solve investment and financing issues from different perspectives, with numerical underpinnings without neglecting the underlying concepts.
After completing the course, students have acquired the following qualifications:
Being able to apply the basic techniques of accounting and financing in small cases. Accounting focuses on the balance sheet, profit and loss account and cash flow statement, with the basic principles of accounting. The financing focuses on the market value and the principles of financial arithmetic.
Being able to describe and apply the relationship between value, cash flows and return in the investment analysis, the valuation of shares and the company.
Being able to name and explain the contractual problems (agency theory and information asymmetry) that play a role in attracting capital (financing) and any solutions to these problems.
Being able to explain and apply the relationship and differences between accounting and finance in the field of valuation.
Being able to explain and apply the operational and financial risk and the relationship with the claimed return on capital.
Being able to integrate separate insights of entrepreneurial finance, also with other business science disciplines, in particular strategy and marketing.
Mode of instruction
Number of 2 hours: 7
Teacher: J.A. den Ouden
Required preparation by students: reading relevant chapters and articles per week.
Number of 2 hours: 7
Teacher: J.A. den Ouden
Required preparation by students: reading and preparing case studies. Students who have not prepared will be removed from the workgroups.
Writing assignment (20%). Displaying value creation and valuation by a listed company in which insights from the theory of entrepreneurial finance must be integrated with strategic and marketing-related theories.
The exam concerns the final test of the course and is the only part that can be retaken. The grade of the writing assignment also applies to the resit, but not to the next year (the grade will therefore only remain valid during the academic year). During the teaching period of the course, further information about the writing assignment is provided.
The method of handing in assignments is yet to be determined.
Areas to be tested within the exam
The exam material includes the mandatory literature, the prescribed cases, articles and what has been discussed during lectures, working groups and any other forms of education.
- Brealey, R.A., S.C. Myers, A.J. Marcus, Fundamentals of Corporate Finance, McGraw-Hill, (the relevant chapters are included in the schedule). Waiting to purchase; the desired edtion will be announced on Brightspace.
- This mainly contains roster technical matters. The workbook is included on Brightspace.
Check the website under “course and exam enrollment” for information on how to register for the course.
Course coordinator: J.A. den Ouden;
Work address: Steenschuur 25 in Leiden (B2.26);
Accessibility: by appointment;
Telephone: 071 – 527 2727;
Institute: Institute of Tax Law and Economics;
Department: Business Studies;
Address secretariat: Steenschuur 25 in Leiden (B2.26);
Opening hours: Every working day (except Wednesday) from 9.00 - 17.00 hours;
Telephone secretariat: 071 – 527 7851;
In case of (corona)restrictions imposed by the government, this course description is subject to change.