Deck 1: Introduction to Finance for Entrepreneurs

Question 1

Entrepreneurial opportunities can occur only when there are societal changes in the world.

Answer 1

False

Question 2

Financial causes, such as excessive debt and insufficient financial capital, are not major contributors to business failures.

Answer 2

False

Question 3

Although the risks associated with starting a new entrepreneurial venture are large, there is always room for one more success.

Answer 3

True

Question 4

Around two-thirds of new employers survive at least two years, and only about one-half survive for at least five years.

Question 5

Mark Twain once said, "I was always able to see an opportunity before it became one."

Question 6

Entrepreneurship is the process of changing ideas into commercial opportunities and creating value.

Question 7

The entrepreneurial process involves: developing opportunities, gathering resources, and managing and building operations, all with the goal of creating value.

Question 8

Entrepreneurs provide the financing to individuals who think, reason, and act to convert ideas into commercial opportunities and create opportunities.

Question 9

In Chapter 1, five megatrend categories are identified as sources of entrepreneurial opportunities.

Question 10

Three of the major megatrends discussed in Chapter 1 include: societal trends or changes, demographic trends or changes, and technological trends or changes.

Question 11

A market-oriented economic system provides an environment that fosters the formation, development, and transformation of ideas into useful products and services.

Question 12

An entrepreneur is an individual who thinks, reasons, and acts to convert ideas into commercial opportunities and to create value.

Question 13

Nearly half of business failures are due to economic factors such as inadequate sales, insufficient profits, and industry weakness.

Question 14

Reasonable estimates place nonemployer (e.g., single person or small family)businesses started each year at less than 100,000.

Question 15

A study of the U.S. Census Bureau's Characteristics of Business Owners database suggests that about two-thirds of closed businesses were successful at closure.

Question 16

Capitalism is a market-oriented system that prohibits private ownership of physical and financial assets.

Question 17

It is estimated that more than one million new businesses are started in the United States each year.

Question 18

Democratic capitalism exists where a country or state organized as a democracy adopts a capitalistic economic system.

Question 19

Fads are not predictable, have short lives, and do not involve macro changes.

Question 20

Fads are large societal, demographic, or technological trends or changes that are slow in forming but, once in place, continue for many years.

Question 21

In the broadest context, societal change reflects the evolution of humanity over time.

Question 22

The housing asset bubble burst in 2006.

Question 23

A venture's financial objective is to survive.

Question 24

The millennials generation consists of people born in the United States after 1996.

Question 25

In the early 1970s, Harry Dent recognized that the U.S. economy centered on the creation and distribution of information.

Question 26

One principle of entrepreneurial finance is "risk and expected reward go hand in hand."

Question 27

Technological change may be the most important source of entrepreneurial opportunities.

Question 28

Environmental commerce, or e-commerce, involves the use of electronic means to conduct business online.

Question 29

The time value of money is an important component of the rent one pays for using someone else's financial capital.

Question 30

The "dot.com" or Internet bubble burst in 2008.

Question 31

The sharing economy refers to the cross-referencing of innovations for record-keeping purposes.

Question 32

The me-first economy reflects the willingness of individuals to share their assets with others to provide a new way of distributing goods and services.

Question 33

Perhaps the most important invention in shuttling us from an industrial society to an information society was the computer chip.

Question 34

The gig economy involves individuals working as independent contractors and accepting short-term jobs or assignments, rather than being full-time employees.

Question 35

While cash is the language of business, accounting is the currency.

Question 36

Nine principles of entrepreneurial finance are identified and explored in this textbook.

Question 37

Private financial markets are a place where standardized contracts or securities are traded on organized securities exchanges with restrictions on how they can be transferred.

Question 38

"Crises and "'bubbles'" and "emerging economies and global change" are considered to be sources of entrepreneurial opportunities.

Question 39

The boomers generation applies to people born in the United States during the 1946-1964 time period.

Question 40

Disruptive innovation is an innovation that creates a new market or network that disrupts and displaces an existing market or network.

Question 41

The entrepreneurial process involves:

A)developing opportunities
B)gathering resources
C)managing and building operations
D)developing opportunities, gathering resources, and managing and building operations

Question 42

Which of the following countries engage in democratic capitalism?

A)United States
B)United States, France, and Germany
C)France and Germany
D)United States and France

Question 43

Free cash flows are adjusted for risk and the time value of money when used to calculate the value of a venture.

Question 44

Free cash is all of the cash available to cover operating expenses.

Question 45

An initial public offering provides a venture with a source of bridge financing.

Question 46

The financial objective of increasing value is inconsistent with developing positive character and reputation.

Question 47

The rapid-growth stage directly follows the startup stage.

Question 48

Venture character and reputation can be assets or liabilities.

Question 49

Business angels are wealthy individuals, operating as informal or private investors, who provide venture financing for small businesses.

Question 50

A venture, if organized as a corporation, may desire to provide venture investor liquidity by establishing a public market for its equity.

Question 51

The owner-debtholder conflict is the divergence of the owners' and lenders' self-interests as the firm gets close to going "public."

Question 52

Mezzanine financing is temporary financing needed to keep the venture afloat until the next offering.

Question 53

Entrepreneurial finance is the application and adaptation of financial tools and techniques to the planning, funding, operations, and valuation of an entrepreneurial venture.

Question 54

Early-stage ventures include firms in their development, startup, or survival life cycle stages.

Question 55

Free cash flow is the net income forecasted to be available to the venture's owners over time.

Question 56

The second stage in a successful venture's life cycle is the startup stage.

Question 57

Financial distress occurs when cash flow is insufficient to meet current debt obligations.

Question 58

Owner-manager (agency)conflicts are differences between a manager's self-interest and that of the owners who hired the manager.

Question 59

The goal of the entrepreneurial process is to:

A)develop opportunities
B)gather resources
C)manage and build operations
D)create value

Question 60

Free cash exists when cash exceeds that which is needed to operate, pay creditors, and invest in assets.

Question 61

Fads:

A)are not predictable
B)have short lives
C)do not involve macro changes
D)are not predictable, have short lives, and do not involve macro changes

Question 62

Which of the following is considered to be an agency conflict?

A)owner-manager conflict
B)stockholder-manager conflict
C)stockholder-debtholder conflict
D)owner-debtholder conflict

Question 63

Where individuals accept short-term job assignments instead of having full-time employment is called the:

A)sharing economy
B)gig economy
C)make-work economy
D)declining economy

Question 64

Which of the following individuals once said, "I was seldom able to see an opportunity, until it ceased to be one."

A)Mark Twain
B)Bill Gates
C)Steve Jobs
D)Jeff Bezos

Question 65

The sharing economy involves:

A)the traditional distribution model
B)peer-to-peer arrangements
C)hierarchical arrangements involving a third intermediary party
D)peer-to-peer and hierarchical arrangements

Question 66

Successful entrepreneurs do not exhibit which of the following traits?

A)recognize and seize commercial opportunities
B)tend to be doggedly optimistic
C)express conditional optimism
D)are pessimistic about the future

Question 67

The time value of money concept is associated with which of the following principles of entrepreneurial finance?

A)real, human, and financial capital must be rented from owners
B)risk and expected reward go hand in hand
C)while accounting is the language of business, cash is the currency
D)it is dangerous to assume that people act against their own self-interests

Question 68

Which of the following is not considered to be a megatrend in this textbook?

A)societal, demographic, and technological changes
B)crises and "bubbles"
C)fads
D)emerging economies and global changes

Question 69

Harry Dent documented major generation waves in the United States during the twentieth century in:

A)1972
B)1982
C)1993
D)2003

Question 70

What is the number of principles of entrepreneurial finance that are emphasized in this textbook?

A)three
B)five
C)seven
D)nine

Question 71

The sharing economy is a(n):

A)developing societal megatrend
B)fad
C)exchange of food at local restaurants
D)demographic bubble

Question 72

Maximizing the value of the venture for its owners is the common financial goal of which of the following?

A)the entrepreneur
B)the debtholders
C)the venture equity investors
D)the entrepreneur and the venture equity investors

Question 73

Which of the following generation classifications is associated with births in the 1965-1980 time period?

A)boomers
B)Generation X
C)millennials
D)Generation Z

Question 74

The "dot.com" or Internet bubble burst in:

A)1990
B)2000
C)2006
D)2008

Question 75

An innovation that creates a new market or network that displaces an existing market or network is called a:

A)crisis or "bubble"
B)disruptive innovation
C)fad
D)negative innovation

Question 76

E-commerce refers to:

A)environmental commerce
B)electronic commerce
C)economic commerce
D)exploratory commerce

Question 77

About one-half of all new employers in the United States survive for at least how many years after being started?

A)two years
B)three years
C)five years
D)eight years

Question 78

About what percent of all new employers in the United States survive for at least two years?

A)one-fifth
B)one-third
C)one-half
D)two-thirds

Question 79

Which of the following is not a source of entrepreneurial opportunities referred to in this textbook?

A)societal changes
B)political changes
C)demographic changes
D)technological changes

Question 80

Which of the following are sources of entrepreneurial opportunities?

A)societal, demographic, and technological trends
B)crises and "bubbles"
C)emerging economies and global changes
D)societal, demographic, and technological trends; crises and "bubbles"; and emerging
E)economies and global changes