Question

Explain:

a. In what way can a smart money investor be like an angel investor?

b. What is the Capital Gap that exists in the financing timeline and why is it a challenge? What can we do to help solve this problem? Explain

Answer 1

1.a.smart money investor can be like an angel Investor by investing into company at the growing stage when the company which available at low price, and then riding the company when the company becomes a very large company.

Angel investors always forecast at investing for a longer period of time and they know the appropriate entry price and their exit price. smart investor can always be trying to learn from the entry time and the exit time from investment as well as he can also know about the valuation of an investment like when Angel investors are mostly investing into the undervalued company and they are courageous also

1.b. The capital gap that exist in the financial time line represent the gap in the internal financing and the required capital so the relative gap should be financed by the external capital and hence it is a problem because external capital always has a cost embedded to it, so the cost will lead to overall deduction in the profit .

A company should always be selecting such form of capital whose return on capital is higher than the overall cost