Deck 3: Financing a Business

Question 1

At which stage of the life cycle of a business is the entrepreneur most likely to begin seeking external funding?

A) seed or startup stage
B) launch and growth stage
C) maturity stage
D) expansion or re-visioning stage
E) exit stage

Answer 1

B

Question 2

In order to minimize income tax, an entrepreneur should classify cash contribution to the new business as

A) common stock
B) debt
C) preferred stock
D) convertible preferred stock
E) For tax purposes, the IRS requires all cash contribution be classified as equity by the entrepreneur

Answer 2

B

Question 3

According to the Small Business Administration report, the largest providers of business loans in 2013 were

A) banks
B) finance companies
C) crow-funding websites
D) friends and relatives
E) government grants

Answer 3

A

Question 4

Merchant cash advance as a source of finance is

A) very expensive
B) repayments are taken automatically from revenue with no control by the entrepreneur
C) unregulated because legally this form of finance is not a loan
D) easy to obtain
E) all of the above

Question 5

An accredited investor

A) must be a human being
B) in the top 1% of personal wealth
C) must earn over $1 million in annual income
D) is defined by the entrepreneur
E) is defined by the SEC

Question 6

The investment criteria of an angel group or venture capital firm typically does not include

A) a range of funding amounts
B) geographic preference or restriction
C) industry preference
D) systematic risk measure
E) experiences of the management team

Question 7

Small Business Investment Companies (SBIC) are

A) government agencies
B) non-profit organizations managed by the SBA
C) non-profit investment companies following SBA investment criteria and process
D) for profit investment companies following SBA investment criteria and processes
E) for profit investment companies following their own investment criteria and processes

Question 8

Venture capital typically invest

A) at least $100,000
B) at least $250,000
C) at least $500,000
D) at least $750,000
E) at least $1 million

Question 9

Kickstarter, a popular crowdfunding site, reported that the majority of projects receive funding between

A) $1,000 to $10,000
B) $10,000 to $50,000
C) $50,000 to $100,000
D) $150,000 to $200,000
E) $250,000 or more

Question 10

Private equity markets allow an entrepreneur to sell stocks to

A) the public without going through the IPO process
B) any investor provided that they are private investors
C) 30 or few investors. Otherwise they must go public.
D) an unlimited number of accredited investors.
E) a special group of accredited investors approved by the SEC.