8 Startup Finance and Funding Free Online FlashCards

How do one-time startup costs differ from recurring costs?

One-time costs occur before opening, such as equipment or licenses; recurring costs continue over time, such as rent or payroll.

Why should a startup budget include working capital?

Working capital covers the period when expenses have begun but sales are not yet sufficient to support the business.

How is revenue estimated for a product or service?

Revenue equals units sold multiplied by price per unit: $\text{Revenue} = \text{units sold} \times \text{price per unit}$.

How do you calculate ending cash in a cash-flow forecast?

Ending cash equals beginning cash plus cash received minus cash paid: $\text{Ending cash} = \text{beginning cash} + \text{cash received} - \text{cash paid}$.

How do you calculate break-even units?

Break-even units equal fixed costs divided by the difference between price per unit and variable cost per unit: $\text{Break-even units} = \frac{\text{fixed costs}}{\text{price per unit} - \text{variable cost per unit}}$.

What is a key tradeoff of startup debt?

Loans and lines of credit raise funds without selling ownership, but repayment and interest are due even if sales disappoint.

What legal requirements apply to U.S. investment crowdfunding?

In the United States, selling investment securities generally requires registration or an exemption; Regulation Crowdfunding also requires an SEC-registered intermediary and disclosures.

How should a startup connect its funding request to its plan?

Connect the funding amount requested to specific milestones, such as buying equipment, completing product development, or reaching a target number of paying customers.

What makes a business cost variable?

Variable costs rise with sales, such as materials, packaging, payment processing, or shipping.

Why can a profitable business still run short of cash?

A business can show an accounting profit but still run short of cash if customer payments arrive later than expenses such as wages or rent are due.

What do burn rate and runway measure?

Burn rate is the average monthly net cash outflow; runway is available cash divided by monthly burn.

What is a key tradeoff of equity funding?

Equity investment usually avoids scheduled loan repayment, but founders give up some ownership and may share control.