Deck 11: Sources of Funds: Where Do You Get the Money

Question 1

It takes money to make money.

Answer 1

True

Question 2

Two major types of financing are ______ and _______ financing.

A)equity, debt
B)income, loss
C)net worth, real worth
D)corporate, non-corporate
E)asset, liability

Answer 2

A

Question 3

A consulting service offered by the SBA is _______.

A)SCARE (Service Citizens and Retired Entities)
B)MBDA (Minority Business Development Agency)
C)NAACP (National Association for the Advancement of Colored People)
D)SCORE (Service Corps of Retired Executives)
E)Round Table Companies

Answer 3

D

Question 4

_______ is generally at a pre-revenue stage, and seed capital is needed to conduct research and development, cover initial costs, and attract the attention of venture capitalists.

A)Commercial bank financing
B)Seed financing
C)Savings
D)Friends' money
E)Angel fund

Question 5

_______ refers to money provided by investors to startup firms and small businesses with perceived long-term growth potential.

A)Seed capital
B)Debt financing
C)IPO sale
D)Venture capital
E)Private placement

Question 6

_______ credit is credit extended by a supplier.

A)Bank
B)Bootstrap
C)Trade
D)Lease
E)Home equity

Question 7

Which of the following are basic questions the entrepreneur should ask before initiating a search for capital?

A)What shape are my personal finances in?
B)How much capital will I need?
C)Will my sources be reliable?
D)What type of capital is required?
E)Where can I get the funds?

Question 8

What are disadvantages of issuing public stock?

A)It makes the firm subject to greater
B)regulation by the state in which the firm operates.
C)Not having to comply with the laws of the Security Exchange Commission.
D)The small business owner lacks sufficient knowledge of the securities market, and the naive small business person may enter into contracts with brokers that may not be in the best interest of the business.
E)Having to comply with the laws of the Security Exchange Commission.
F) Participating partners must be able to share in the revenues.

Question 9

Which of the following are examples of debt financing?

A)Commercial banks
B)Commercial finance companies
C)Lines of credit
D)Issuing public stock
E)Issuing private stock

Question 10

Which of the following are advantages of leasing equipment?

A)Flexibility with equipment needs and payment schedules
B)Smaller capital requirements
C)Leasing company offers maintenance service for equipment
D)Leasing offers a way to beat the obsolescence problem
E)The absence of depreciation

Question 11

Which government agencies help fund the entrepreneur?

A)Rotary Club International
B)Small Business Administration (SBA)
C)Internal Revenue Service (IRS)
D)Securities and Exchange Commission (SEC)
E)Minority Business Development Agency (MBDA)

Question 12

Identify the three capital needs questions and discuss how each one is important to a business.

Question 13

Explain seed financing.

Question 14

Define debt financing and identify sources of debt financing.

Question 15

Discuss advantages to using bootstrap financing.

Question 16

_______ capital covers long-term projects lasting longer than five years.

A)Intermediate
B)Short-term
C)Long-term
D)Interim
E)Investment

Question 17

_______ capital is funds to be paid back within a period of five years.

A)Intermediate
B)Short-term
C)Long-term
D)Interim
E)Investment

Question 18

Trade credit cannot be obtained from a commercial bank.

Question 19

Lack of adequate startup capital is usually irrelevant to the success of a business.

Question 20

Corporate venture capital is a form of venture capital provided by large firms.

Question 21

Private placements are direct sales of stock positions to private investors without SEC registration and with minimal restrictions.

Question 22

Trade credit has only been around for a short time and is not very useful to financing resources.

Question 23

Lines of credit usually carry higher interest rates than do credit cards.

Question 24

A supplier is someone that the entrepreneur will have to rely on for prompt deliveries, undamaged goods, and extended credit in times of emergency; therefore, you should not just pick any first supplier.

Question 25

Sharing or borrowing equipment is a good example of bootstrap financing.

Question 26

Home equity loans are not available as bootstrap financing.

Question 27

The SBA lends business owners money directly.

Question 28

Many states offer incentives for entrepreneurs to put roots down and create jobs.

Question 29

One exception to the entrepreneurial manager not having to come up with their own funding to start a new venture is the spin-off, which must generally be bought from the parent company.

Question 30

_______ capital is funds that are borrowed for less than one year.

A)Long-term
B)Interim
C)Bootstrapping
D)Initialized
E)Short-term

Question 31

A/n _______ is an individual willing to invest in promising start-up opportunities.

A)buffer
B)angel
C)Good Samaritan
D)partner
E)venturists

Question 32

What is MBDA, and how can it help in small businesses?