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Risk of Entrepreneurial Investments - Term Paper Example

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The following paper entitled 'Risk of Entrepreneurial Investments' presents taking risk which is the first and foremost prerequisite to enjoy the fruit of return. Mostly, risk and return are associated and are linked with entrepreneurial investments…
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Risk of Entrepreneurial Investments
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Download file to see previous pages Entrepreneurial investments require taking many risks and return measurement methods. But, before going to take the risk, capital is required to be available for the purpose of investments. Many methods are available that can be used for the purpose of arranging capital. Venture capital can be a good source of finance. In which mostly, wealthy individuals provide their capital to investment companies, small businesses, and limited partnerships. This type of capital is collected to invest in a new business or venture. A considerable amount of capital is required to invest with the intent of receiving high returns. Furthermore, angel investors also provide capital for those who want to establish their small businesses or those who want to become investment entrepreneurs. This type of capital is mostly provided and given for a one-time injection. This one-time injection provides a root to grow the tree of a business or investment. Also, Initial Public Offerings (IPOs) can also be used for the purpose of raising capital. This raised capital can be used for the purpose of doing further investment in different and variety of assets.
But, using this method of collecting capital requires a company to issue publically tradable shares and securities. After arranging and investing capital, the return can be measured and understood with the use and application of the Internal Rate of Return (IRR). The internal rate of return provides a figure of the annual yield on an investment (Gottschalg & Phalippou, 2007). This yield measurement tool is considerably helpful in determining the level of yield that can be expected from a set of investments. A particular numerical method of the internal rate of return is used to obtain the figure of yield. Also, Net Present Value (NPV) is widely used as a tool for evaluation. ...Download file to see next pagesRead More
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