Question 1

What does CSBFP stand for?
A) Credit and Support for Business by Financing Programs
B) Canada Strategic Business Financing Program
C) Credit for Small Business Financing Program
D) Canada Small Business Financing Program

Accepted Answer

CSBFP stands for Canada Small Business Financing Program.

Question 2

Partners that own a ski resort are requesting a loan from their bank for $175,000 to upgrade the resort's main chair lift.What information will the bank want to know?
A) company's forecasted sales
B) value of the company's accounts receivable
C) value of the company's inventory
D) credit history of each of the company's partners

Accepted Answer

The answer of Partners that own a ski resort are...

Question 3

Corrina is requesting a loan from her company's bank.She has informed the bank she needs $250,000 to develop an overseas market and feels she will be able to pay the loan back within 5 years.What else with the bank want to know?
A) when the money will be needed
B) the names of all the owners in the company
C) the size of the company's receivables
D) forecasts for the new market

Accepted Answer

The answer of Corrina is requesting a loan from her...

Question 4

What does a banker evaluate to determine a company's capacity to repay a bank loan?
A) the firm's credit history
B) the firm's ability to generate cash flows
C) the collateral used to secure the loan
D) the character of the owners of the business

Accepted Answer

Bankers evaluate a company's ability to generate cash flows in order to repay a loan. This is because cash flow represents the ability of a company to generate enough money to pay its expenses, including loan repayments. While a company's credit history, collateral, and the character of its owners are also factors that may be considered, they do not provide as direct an indication of a company's ability to generate the cash necessary to repay a loan.

Question 5

An entrepreneur with a patent on a cyber-security software system was able to get financing from a venture capitalist for his start-up.What did the venture capitalist likely evaluate about the start-up that led to the financing?
A) start-up is in the technology industry
B) entrepreneur has a patent
C) projected growth rate exceeds 40%
D) entrepreneur agreed to a loan

Accepted Answer

The answer of An entrepreneur with a patent on a...

Question 6

What are the 5 Cs of credit that bankers refer to when making a loan decision?
A) character,capacity,capital,collateral,and costs
B) character,capacity,capital,collateral,and credit
C) character,capacity,capital,collateral,and conditions
D) character,capacity,capital,collateral,and collections

Accepted Answer

The 5 Cs of credit that bankers refer to when making a loan decision are character, capacity, capital, collateral, and conditions. These factors help lenders assess the creditworthiness of a borrower.

Question 7

After being turned down from the banks to provide her with start-up capital for a new venture,Juanita borrows money from a close friend a lower interest rate.What should Juanita do regarding this loan?
A) Put the terms of the loan in writing.
B) Slowly pay the loan since the interest rate lower.
C) Offer her friend shares in the company.
D) Allow her friend to help make operating decisions.

Accepted Answer

Juanita should put the terms of the loan in writing to avoid any misunderstandings or disputes in the future. This will also help to ensure that the friend understands the terms and conditions of the loan and that both parties are clear on their obligations.

Question 8

Where do prospective entrepreneurs usually acquire their initial financing?
A) venture capitalists
B) personal savings
C) wealthy individuals
D) the securities market

Accepted Answer

Prospective entrepreneurs usually acquire their initial financing through personal savings, which allows them to have full control over their business and not be accountable to external investors. While venture capitalists, wealthy individuals, and the securities market are also potential sources of funding, they often require a significant amount of equity or control in the business in exchange for their investment. Personal savings offer the most flexibility and autonomy for new entrepreneurs.

Question 9

Nigel decides to issue more shares to raise capital so that he can purchase a high-speed printer for his media business.What will be the repercussions of this decision?
A) voting control will decrease
B) voting control will be unaffected
C) financial risk will be higher
D) financial risk will be unaffected

Accepted Answer

By issuing more shares, Nigel will be diluting the ownership of existing shareholders, thereby reducing their voting control. This is because each share represents a fraction of ownership and voting power in the company. Additionally, the financial risk will not necessarily be higher or unaffected, as it depends on how the additional capital is used and the overall financial situation of the company.

Question 10

Why might a company choose to increase its debt rather than issue stock?
A) to limit the potential rate of return to owners
B) to require owners to give up some voting control
C) to reduce financial risk
D) to retain full ownership and control

Accepted Answer

Issuing debt instead of stock allows a company to raise capital without diluting ownership or giving up any control to new shareholders.

Question 11

At a meeting of major stock holders a decision is made to finance expansion to overseas markets by issuing more shares and not taking a long-term note with the company's bank.One of the stock holders opposed this decision but was out-voted.Why would this stock holder oppose this decision?
A) Issuing shares will increase the likelihood of decreasing the owners return on investment.
B) The financial risk would be lower if the note was taken out with the bank.
C) More shares will increase their control but increase their personal taxes.
D) Each of the shareholders would have to increase their own investment.

Accepted Answer

The stock holder opposes the decision because issuing more shares will increase the total number of shares outstanding, ultimately diluting the ownership stake and potentially decreasing the owners' return on investment.

Question 12

Giovani is selling common stock to raise funds for his company's growth.He is only selling stock to several family members and business acquaintances.What is this sale of stock called?
A) private placement
B) IPO
C) debt financing
D) bootstrapping

Accepted Answer

The sale of stock to a select group of individuals, such as family members and business acquaintances, is called a private placement. This is different from an initial public offering (IPO), which involves selling stock to the general public, and debt financing, which involves borrowing money instead of selling ownership in the company. Bootstrapping refers to starting and growing a business without external funding or investment.

Question 13

Which loan repayment schedule will result in less being paid over the life of the term?
A) equal monthly payments
B) decreasing monthly payments
C) straight-line payments
D) amortized payments

Accepted Answer

Decreasing monthly payments result in less interest being paid over the life of the loan because the principal is reduced more quickly, leading to less interest accruing over time.

Question 14

How does the Program for Export Market Development (PEMD)assist Canadian businesses?
A) It assists them in marketing their products within Canada.
B) It assists them in financing commercial start-ups in less-developed areas of Canada.
C) It assists them in marketing their products abroad through financial assistance to visit foreign markets or attend international trade shows.
D) It assists them by providing insurance for Canadian exporters.

Accepted Answer

The Program for Export Market Development (PEMD) assists Canadian businesses in marketing their products abroad through financial assistance to visit foreign markets or attend international trade shows. The program provides funding for eligible expenses related to market research, market development, and marketing activities outside of Canada. It aims to help Canadian businesses expand their international presence and increase their exports. Option A is incorrect because the program focuses on exporting products outside of Canada, not within Canada. Option B is incorrect because the program does not provide financing for commercial start-ups in less-developed areas of Canada. Option D is incorrect because the program does not provide insurance for Canadian exporters.

Question 15

Which statement best describes trade credit (accounts payable)?
A) It is extended by suppliers.
B) It is financed on trade debit account cards.
C) It has higher interest charges than credit cards.
D) It is a product on consignment that is paid for when used.

Accepted Answer

Trade credit or accounts payable is credit that is extended by suppliers to their customers. It allows the customer to purchase goods or services on credit and pay for them at a later date. It is a common tool used by businesses to improve cash flow and manage their expenses.

Question 16

Having been turned down by her bank for a business loan,Pauline creates a website to invite the general public to invest in her organic lunch service for school children.What kind of financing is this called?
A) private placement
B) initial public offering
C) crowdfunding
D) bootstrapping

Accepted Answer

This type of financing is called crowdfunding, where Pauline is inviting the general public to invest in her business.

Question 17

Jennifer has a patent for her software and feels the potential for profits is very high given the current market.Even though she is a one-person business at start-up she is confident she will be able to secure financing.What else does Jennifer need to know to determine how her business will financed?
A) sales of her closest competition
B) preference for debt or equity
C) demographics of her target market
D) projected salaries of the company's executives

Accepted Answer

Jennifer needs to determine her preference for financing through debt or equity. This will determine the type of investors she will seek and the terms of the financing. Knowledge of sales of closest competition, demographics of target market, and projected salaries of executives may be helpful in other aspects of the business, but will not directly impact financing decisions.

Question 18

Where do over half of the funds venture capital firms raise to invest come from?
A) overseas investors
B) American investors
C) Canadian investors
D) large investment firms

Accepted Answer

The answer of Where do over half of the funds...

Question 19

Caitlin is studying entrepreneurship and interviews a business owner.She asks the owner how she financed the preparation of the business plan.What would the business owner's response most likely be?
A) personal savings
B) commercial banks
C) business suppliers
D) asset-based lenders

Accepted Answer

The most common source of financing for the preparation of a business plan is personal savings. Many entrepreneurs use their own money to get their business idea off the ground before seeking outside funding or investments.

Question 20

Corrina is requesting a loan from her company's bank.She has informed the bank she needs $250,000 to develop an overseas market and feels she will be able to pay the loan back within five years.What else will the bank want to know?
A) when the money will be needed
B) the names of all the owners in the company
C) the size of the company's receivables
D) forecasts for the new market

Accepted Answer

The answer of Corrina is requesting a loan from her...

Quiz 14: Sources of Financing

What does CSBFP stand for?

Partners that own a ski resort are requesting a loan from their bank for $175,000 to upgrade the resort's main chair lift.What information will the bank want to know?

Corrina is requesting a loan from her company's bank.She has informed the bank she needs $250,000 to develop an overseas market and feels she will be able to pay the loan back within 5 years.What else with the bank want to know?

What does a banker evaluate to determine a company's capacity to repay a bank loan?

An entrepreneur with a patent on a cyber-security software system was able to get financing from a venture capitalist for his start-up.What did the venture capitalist likely evaluate about the start-up that led to the financing?

What are the 5 Cs of credit that bankers refer to when making a loan decision?

After being turned down from the banks to provide her with start-up capital for a new venture,Juanita borrows money from a close friend a lower interest rate.What should Juanita do regarding this loan?

Where do prospective entrepreneurs usually acquire their initial financing?

Nigel decides to issue more shares to raise capital so that he can purchase a high-speed printer for his media business.What will be the repercussions of this decision?

Why might a company choose to increase its debt rather than issue stock?

At a meeting of major stock holders a decision is made to finance expansion to overseas markets by issuing more shares and not taking a long-term note with the company's bank.One of the stock holders opposed this decision but was out-voted.Why would this stock holder oppose this decision?

Giovani is selling common stock to raise funds for his company's growth.He is only selling stock to several family members and business acquaintances.What is this sale of stock called?

Which loan repayment schedule will result in less being paid over the life of the term?

How does the Program for Export Market Development (PEMD) assist Canadian businesses?

Which statement best describes trade credit (accounts payable) ?

Having been turned down by her bank for a business loan,Pauline creates a website to invite the general public to invest in her organic lunch service for school children.What kind of financing is this called?

Where do over half of the funds venture capital firms raise to invest come from?

Caitlin is studying entrepreneurship and interviews a business owner.She asks the owner how she financed the preparation of the business plan.What would the business owner's response most likely be?

Corrina is requesting a loan from her company's bank.She has informed the bank she needs $250,000 to develop an overseas market and feels she will be able to pay the loan back within five years.What else will the bank want to know?