Answered: Presuming the company sells for…

Century 21 Accounting Multicolumn Journal

11th Edition

ISBN:9781337679503

Author:Gilbertson

Publisher:Gilbertson

Chapter17: Financial Statement Analysis

Section: Chapter Questions

Problem 4AP

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Question

A high growth company raised $10,000,000.00 in capital from a venture capital firm in the early growth stage of funding. The pre-money valuation of the company at the time the capital was raised $20,000,000.00. The terms of the investment also had an annual dividend of 8% and an exit preference of 1.2X upon a liquidity event. Based on these facts please answer the following questions.

1. Presuming the company sells for $27,000,000.00 what would the owners (company) receive in proceeds.
2. Presuming the company sells for $100,000,000.00 but also has $10,000,000.00 of debt on the balance sheet, what will the owners receive in proceeds?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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