Deck 8: Sources of Capital for Entrepreneurs

Question 1

Sources of debt financing include trade credit, accounts receivables, factoring, and finance companies.

Answer 1

True

Question 2

A potential danger of social lending is the implication that social loans may be viewed as gifts and taxed accordingly.

Answer 2

True

Question 3

The venture capital pool is rapidly declining due to overfunding.

Answer 3

False

Question 4

History and nature of the company, capital structure, and description of any material contracts are just a few examples of the specific detailed information that must be presented about a firm that is going public.

Question 5

Venture capital firms want to own control of the firms in which they invest.

Question 6

Venture capitalists are quick to invest.

Question 7

There is no way for the venture capitalist adequately to evaluate a new venture.

Question 8

The average size of a social loan is around $7,000.

Question 9

Venture capitalists, surprisingly, require little information before they make an investment.

Question 10

The business plan is a critical element in a new-venture proposal.

Question 11

Equity financing is money invested in the venture with legal obligations to repay the principal amount of interest or interest rate on it.

Question 12

Social lending sites are different from so-called microlending sites.

Question 13

Venture capitalists are a valuable source of equity funding for new ventures.

Question 14

Sophisticated investors are wealthy individuals who invest more or less regularly in new and/or early- and late-stage ventures.

Question 15

Use of debt to finance a new venture involves a payback of funds plus an interest fee for the use of the money.

Question 16

The most common sources of debt financing are commercial banks.

Question 17

Regulation D augments the regulations for reports and statements required for selling stock to private parties, friends, employees, customers, relatives, local professionals.

Question 18

Public offering is a term used to refer to corporations taking public donations to raise capital.

Question 19

Because the advantages of going public outweigh the disadvantages, it is in a corporation's best interest to go public.

Question 20

Private placement is a method of raising capital through the private placement of securities.

Question 21

There is only a small number of informal risk capitalists in the market today.

Question 22

Frugality is deemed a bootstrapping technique.

Question 23

Informal risk capitalists are often referred to as "business angels."

Question 24

Informal risk capitalists are those who have already made their money and now seek to help new ventures.

Question 25

At start-up time, forms of financing includes all but which of the following?

A) equity
B) private equity
C) equitable payback
D) bank loans

Question 26

Which of the following would be most commonly used for medium-term financing?

A) insurance companies
B) trade credit
C) finance companies
D) leasing companies

Question 27

When starting a business, which of the following sources of financing are most likely to be used?

A) trade credit
B) factors
C) leasing companies
D) insurance companies

Question 28

Which of the following is (are) sources of capital for entrepreneurs?

A) equity
B) debit
C) auto leasing
D) credit cards

Question 29

Venture capitalists are usually satisfied with a reasonable return on investments.

Question 30

Venture capitalists are slow to invest.

Question 31

One of the most frequently used criterion in evaluating new ventures, is the ability of the entrepreneur to sustain intense effort.

Question 32

Most venture capital funds later stages of venture development, not the start-up (or seed) stage.

Question 33

Entrepreneurs are rarely able to set up a business without investment funds or bank loans.

Question 34

Many new ventures find that debt financing is

A) necessary.
B) a waste of time.
C) not an important consideration.
D) their major source of funds.

Question 35

When starting a business, which of the following sources of financing are least likely to be used?

A) trade credit
B) factors
C) leasing companies
D) insurance companies

Question 36

Which of the following would be most commonly used for short-term financing?

A) insurance companies
B) trade credit
C) finance companies
D) leasing companies

Question 37

Which of the following would be most commonly used for long-term financing?

A) insurance companies
B) trade credit
C) finance companies
D) leasing companies

Question 38

Venture capitalists need only basic summary information before they make funding decisions.

Question 39

Approximately how many commercial banks are there in this country?

A) about 40,000
B) about 7,000
C) about l7,000
D) about 20,000

Question 40

Which of the following is not a question commonly asked by banks of entrepreneurs?

A) What do you plan to do with the money?
B) How much do you need?
C) What interest rate did you have in mind?
D) How will you repay the loan?

Question 41

A disadvantage of debt financing is

A) regular interest payments.
B) possible cash flow enhancement.
C) inhibition of growth and development due to equity investments.
D) relinquishment of ownership.

Question 42

SBIC stands for the

A) small business in capital.
B) securities, bonds, investment, capital.
C) small-business investment companies
D) sources of business investment companies

Question 43

When accounts receivable are bought from a company for capital funding it is called

A) trade credit.
B) financing.
C) leasing.
D) factoring.

Question 44

Long-term debt is used for

A) start-up capital.
B) purchase of property or equipment.
C) payment of payroll.
D) both a and b

Question 45

SEC stands for the

A) Stock Exchange Corporation.
B) Securities and Exchange Commission.
C) Standard Equity Commission.
D) Source of Equity Company.

Question 46

Equity capital is often raised through:

A) public stock offerings.
B) option sales.
C) donations.
D) preferred issues.

Question 47

Which of the following is not one of the most common questions typically required to be answered by entrepreneurs seeking funding?

A) What do you plan to do with the money?
B) How much money do you need?
C) When do you need the money?
D) What exact date will you repay the money?

Question 48

Which of the following is not a type of debt financing?

A) private placement
B) trade credits
C) finance companies
D) accounts receivables

Question 49

Equity capital is

A) paid back within one year.
B) paid back after five years.
C) not a loan but a form of stock.
D) loans from family.

Question 50

Advantages of debt financing include all of the following except:

A) low interest rates that justify the opportunity cost.
B) regular interest payments.
C) potential greater return on equity.
D) no relinquishment of ownership.

Question 51

The Regulation D exemptions include all of the following except:

A) placements of up to $5 million.
B) placements of less than $500,000.
C) placements in excess of $5 million.
D) placements in excess of $l0 million.

Question 52

__________ is(are) one of the disadvantages of going public.

A) Proxy statements
B) Form 8-K
C) Shareholder pressure
D) Liquidity

Question 53

One of the advantages of public offerings is

A) liquidity.
B) disclosure.
C) requirements.
D) cost.

Question 54

The most common source of debt financing is

A) trade credit.
B) factoring.
C) commercial banks.
D) finance companies.

Question 55

When going public with public offerings an advantage might be

A) size of the company's capital amount.
B) the company's size.
C) the company's market share.
D) the product price.

Question 56

The main objective of Regulation D is to

A) increase investment in private placement.
B) regulate new small-business investment.
C) make it easier and less expensive for small ventures to sell stock.
D) reduce debt financing by small enterprises.

Question 57

Short-term debt is

A) paid back in six months.
B) paid back in one year.
C) paid back after sales.
D) paid back over an indefinite period of time.

Question 58

Evaluation of new-venture proposals includes all the following processes except

A) oral presentation
B) initial screening
C) evaluation of the business plan
D) a product prototype

Question 59

Which of the following is a type of equity financing?

A) convertible debentures
B) common stock
C) loan with warrants
D) loan without warrants

Question 60

When securing a bank loan an entrepreneur should be prepared to answer which of the following questions except?

A) When do you need it?
B) How do you need it?
C) What do you need it for?
D) What is the price of your product?

Question 61

Informal investors find projects through

A) newspapers.
B) a network of friends.
C) commercials.
D) banks.

Question 62

When going public specific detailed information that must be presented includes

A) a 20-year plan.
B) the capital structure of the company.
C) any financial conflicts of interest.
D) any previous business failures.

Question 63

How many people in America have net worth in excess of $1 million?

A) less than 100,000
B) about 200,000
C) about 500,000
D) more than l,000,000

Question 64

Major trends in the venture capital field today include all of the following except

A) less specialized and more homogenous funds
B) emerging feeder funds
C) decrease in start-up investment amounts
D) global reach

Question 65

An informal risk capitalist is referred to as:

A) your neighbor.
B) a business angel.
C) a retiree.
D) someone with extra money to invest but who is not interested becoming an entrepreneur.

Question 66

Which is one of the most important questions for entrepreneurs to ask regarding venture capitalists?

A) What is it like to work with their firm?
B) Are they good communicators?
C) Are they wealthy?
D) Are they good at financial computation?

Question 67

Which is not a stage of the evaluation process?

A) initial screening
B) evaluation of the business plan
C) group discussion
D) management integration

Question 68

Which of the following does not represent a category of angel investors?

A) micromanagement angels
B) entrepreneurial angels
C) amateur angels
D) corporate angels

Question 69

Which is an important question for the entrepreneur to ask when evaluating the venture capitalist?

A) Is the person someone with whom the entrepreneur can work?
B) Is the person a close relative?
C) Is the person wealthy?
D) Is the person a college graduate?

Question 70

Venture capitalists are experienced professionals who provide a full range of service for new ventures including

A) supplying labor for start-up.
B) market research and strategy for pricing.
C) management consulting.
D) R & D knowledge.

Question 71

Of the following, which is not typically identified as a bootstrapping technique?

A) sharing office space
B) hiring seasoned veterans
C) encouraging customers to pay early
D) trading equity for services

Question 72

Criteria that venture capitalists use in evaluating new venture proposals include:

A) the entrepreneur's education.
B) the entrepreneur's travel expenses.
C) the characteristics of the product or service.
D) when they will be paid back in full.

Question 73

How do informal investors find projects to invest in?

A) networks of friends
B) business classifieds
C) Forbes
D) university think tanks

Question 74

Which of the following terms is not synonymous with social lending?

A) crowdfunding
B) peer-to-peer (P2P) lending
C) banking 2.0
D) commercially viable lending

Question 75

The entrepreneur should ask the venture capitalist _____ questions.

A) at most ten
B) exactly twenty
C) an unlimited number of
D) no

Question 76

Of the following, which is more likely than the others to be deemed a potential danger of social lending?

A) high funding success rate
B) business plan disclosure
C) potential tax advantage
D) regulatory certainty

Question 77

Venture proposals are often rejected due to significant deficiencies in

A) the size of the proposal.
B) financial projections.
C) available funds.
D) both a and b

Question 78

Which of the following is a True statement about raising capital?

A) All capital is raised through formal sources.
B) All capital is raised through debt sources.
C) Capital is easy to get.
D) It often takes a great deal of time to raise capital.

Question 79

Regulation D defines separate exemptions that are based on the amount of money being raised. Which is not a rule that accompanies these exemptions?

A) rule 503
B) rule 504
C) rule 505
D) rule 506

Question 80

Which of the following statements is not True of venture capitalists?

A) They want the entrepreneur and the management to run the company.
B) They expect high return on investments.
C) They are interested in trying to manage firms themselves.
D) They take a long time to raise venture capital.