Simple Term Paper about:

 Challenges/issues encountered by investors in analyzing financial statements/reports.

 How are you going to resolve those challenges?

Before we start on answering these questions. First, we must know what is an investor means and
what is a financial statement:

What is an investor?

INVESTOR is an individual who allocates money to investment products, services or other things
that involves money with the expectation of financial return. Types of investment includes equity,
debt securities, real estate, money, commodity and someone who provides a business with capital
and someone who buys a stock are both investors.

We all know that the primary concern of an investor is to minimize risk while maximizing return,
as opposed to a speculator, who is willing to accept a higher level of risk in the hopes of collecting
higher than average profits. They are neither a speculator which who takes on high risk for high
rewards nor a gambler who takes on the risk of total loss for out of proportion rewards but one
whose primary objectives are preservation of the original investment, a steady income and capital
appreciation.

Types of investors:

 Banks

Not all investors are just allocating money for financial returns, some investors start with
a bank loan. A bank will want to see a detailed business plan and thorough description of
the investors business and its prospects.

It is easy to get a loan when you go to blank with which you already have a relationship.
Be prepared to prove financial responsibility and wait the time it may take to process the
loan.
 Angel Investors

They are the angels on your side when it comes to seeking outside financing. This type of
investor is typically an entrepreneur who has enough wealth to help others. Angel investors
invest in business in which they believe but they realize may struggle to find other
financing.

An angel investor may buy stock from a company or make a loan. Some nerve as mentors
and advisors. Some may specialize, such as high-tech angels who prefer helping to bring
new technology to the marketplace and may or may not want to actively participate in the
company.

Another type is a return on investment angel, who expects to see a financial payback from
a high-risk investment. Return on investment angels are more likely to invest when the
economy is stable or improving. They may not want to be involved past investing but are
often hopeful that they will get a huge payoff if the company goes public or gets purchased
by a bigger corporation.

Considerations when approaching angel investors include:

▫ How much control does the investor expect?

▫ How much control are you willing to share?
▫ What is the investor's motivation?
▫ How experienced is the investor?
▫ Does your venture meet the investor's investment requirements?
 Peer to peer Lending

Peer-to-peer lending lets people list projects online for consideration by potential investors.
This type of investor brings the startup and small business owners together with
entrepreneurs willing to help and invest.

Peer to peer lending steps:

▫ Have a plan. Make sure to include what you find out from market research,
competitive analysis, financial forecasts, expected returns and more.
▫ Tell your story. Tell what you hope to achieve and what your background is.
 ▫ Share your achievements and progress. Basically, sell yourself and your business.
How much have you invested yourself and at what stage is your business? What
milestones have you reached? You want to prove to potential investors that your
business is on the path to success. Going peer-to-peer lending may cut out the
middleman, but not financial common sense on the part of investors.
 Venture Capitalist

This type of investor expects you to show you have a solid business plan. A venture
capitalist also wants to see a high return of profit.

Venture capitalists may invest as much as millions of dollars. They will invest the money
needed to help that happen. They do that by securing equity capital, or a share in your
company. They are betting that the share will be worth more within time and will wait to
get a return on the investment.

Giving up that equity capital means giving up some ownership or say in the company.
Venture capitalists may also want a steeper return on their investment than what the interest
rate may be on a business loan.

 Personal Investors

Mixing business with family is risking, bringing business disputes to family gatherings and
other events. You risk hurting not only your finances but also a relative's or friend's if the
business doesn't take off as well as you anticipate. There are stories about people
successfully choosing this option, but before you do, make sure your family ties are strong
enough to withstand the pressures of doing business. Have each party sign a promissory
note that spells out the repayment terms or, if you are partnering with a friend or family
member, sign a partnership agreement.

These are the different types of investors that may help you launch your dream company.
Remember, each situation is different, and take legal precautions before reaching out to any
investor. Don’t assume that all investors are the same, just because their money is always the
same color. Every entrepreneur should do the same due diligence on a potential investor that
smart investors do on their startups.
Taking on an investor is a long-term relationship, like getting married, that has to work at every
level. Let’s just say that every investor is different, without trying to define what is good or bad
for you and your startup. Investors are human and subject to human tendencies, whether they are
your rich uncle, an angel investor with personal funds or a venture capital investor with
institutional money.