Question 1

Jim Lightsey sold stock to investors in order to finance his company,which will run an Internet auction for sports memorabilia.Lightsey used which type of financing?

Accepted Answer

Jim Lightsey used equity financing by selling stock to investors in order to finance his company. This means that the investors are buying a percentage of ownership in the company in exchange for their investment.

Question 2

Which of the following best describes venture capital?

Accepted Answer

Venture capital is financing obtained from investment companies that specialize in financing small, high-growth companies. It is often provided in exchange for equity in the company and can be used for research and development, marketing, and expansion. It is different from traditional bank financing as it involves more risk-taking and is typically provided to start-ups or early-stage companies with significant growth potential.

Question 3

Which of the following is the primary source of financing for all small business start-ups?

Accepted Answer

The owner's personal savings are the primary source of financing for small business start-ups as they do not have established credit or assets to secure loans from banks or other financing sources. Supplier and customer credit may be used for ongoing operations but not likely for start-up costs. Banks and the Business Development Bank of Canada may be options for financing, but they often require collateral or a proven track record of success.

Question 4

Which of the following two forms of business financing describe borrowed funds and ownership funds,respectively?

Accepted Answer

A) Debt financing involves borrowed funds that must be repaid with interest over time, while equity financing involves ownership funds in which investors give money to the business in return for ownership in the company.

Question 5

The Business Development Bank of Canada provides which of the following services?

Accepted Answer

The answer of The Business Development Bank of Canada provides...

Question 6

Which of the following is at the core of most business failures?

Accepted Answer

Inadequate planning is often the root cause of most business failures. Without proper planning, businesses may not be able to anticipate and adapt to changes in the market, competition, or internal factors such as cash flow and inventory management. Poor planning may also lead to inefficient use of resources and lack of direction, which can ultimately lead to failure. Therefore, it is important for businesses to develop a well-thought-out plan to ensure long-term success.

Question 7

How are baby boomers expected to affect the economy in the future?

Accepted Answer

Baby boomers are expected to spend money to make their lives more comfortable as they age, such as on healthcare, leisure activities, and home improvements. This is expected to stimulate the economy, particularly in industries catering to their needs.

Question 8

Which of the following is financing obtained from investment companies that specialize in financing small,high-growth companies and receive an ownership interest and a voice in management in return for their money?

Accepted Answer

Venture capital is financing obtained from investment companies that specialize in financing small, high-growth companies and receive an ownership interest and a voice in management in return for their money. Choice A is incorrect because equity financing simply refers to raising funds by selling ownership shares in a company. Choice B is a term that is not commonly used in finance. Choice D refers to raising funds by borrowing money that must be repaid with interest.

Question 9

Jeff Arnold and Reggie Bradford created WebMD,an Internet provider of health care information.Early in the development of this high-growth company,Arnold attracted a group of investors who provided him with which of the following type of financing?

Accepted Answer

The answer of Jeff Arnold and Reggie Bradford created WebMD,an...

Question 10

Which of the following best describes angel investors?

Accepted Answer

Angel investors are individuals who provide funding for start-up businesses. They typically invest their own money in exchange for an equity stake in the business. They are often referred to as "angels" because they provide a much-needed source of funding for entrepreneurs who are just starting out.

Question 11

When buying an existing business,the prospective buyer should ask questions about the operation of the business.Which of the following would be an INAPPROPRIATE question to ask?

Accepted Answer

This question is inappropriate because it is not relevant to the current operation of the business and is more focused on the seller's personal finances. The other questions are all important for the buyer to know in order to make an informed decision about purchasing the business.

Question 12

Which of the following provides the start-up financing for the majority of new small businesses?

Accepted Answer

The majority of new small businesses are financed by the business owner themselves, through personal savings or by taking out loans against personal assets. While some may also receive funding from friends and family, it is rare for small businesses to receive start-up financing from banks or venture capitalists. The Business Development Bank of Canada may provide financing for some small business ventures, but it is not the primary source of start-up financing for the majority of new small businesses.

Question 13

Jeff Arnold and Reggie Bradford created WebMD,an Internet provider of health care information.Early in the development of this high-growth company,Arnold and Bradford attracted a group of investors who provided them with money needed to acquire other Internet companies with similar missions.What is the investment group called?

Accepted Answer

Angel investors are individuals or a group of investors who provide capital for start-ups or early-stage companies in exchange for ownership equity or convertible debt. They often support businesses at the initial moments when other investors are not prepared to back them.

Question 14

In buying an existing business,the prospective buyer should ask questions about the operation of the business.Which of the following would be the most appropriate question to ask?

Accepted Answer

The most appropriate question to ask when buying an existing business is whether there are any problems with the business. This will give the prospective buyer an idea of what issues need to be addressed and if there are any potential risks in taking over the business. Questions about the use of money, employee issues, and initial investment may also be important but they are not as relevant in determining the current state of the business.

Question 15

Which of the following is an agency of the federal government that offers both managerial and financial assistance to small businesses?

Accepted Answer

The Business Development Bank of Canada is a federal agency that provides managerial and financial assistance to small businesses. The other options listed are not actual agencies of the U.S. government.

Question 16

Seltzer Darrigan borrowed $25,000 from his bank to open an art gallery.Darrigan used which type of financing?

Accepted Answer

Darrigan borrowed money from a bank, which is a form of debt financing.

Question 17

Pim Bouwman quit his lucrative job as a consultant to start a retail website that specializes in Dutch tulip bulbs.To fund his website,he borrowed money from his friends and relatives.In other words,he used which type of financing?

Accepted Answer

Pim Bouwman used debt financing by borrowing money from his friends and relatives.

Question 18

Which of the following does the Business Development Bank of Canada offer?

Accepted Answer

The Business Development Bank of Canada offers bank loans to help entrepreneurs start and grow their businesses. It does not offer the elimination of sales and employee taxation, employee recruiting services, or entrepreneurial ideas.

Question 19

Which of the following best describes the profile of web-driven entrepreneurs?

Accepted Answer

The answer of Which of the following best describes the...

Question 20

Which of the following are individual investors or groups of experienced investors who provide funding for start-up businesses?

Accepted Answer

Angel investors are individual investors or groups of experienced investors who provide funding for start-up businesses, typically in exchange for equity in the company. The other choices, equity entrepreneurs, opportunity entrepreneurs, and entrepreneurial capitalists, are not common terms used to describe this type of investor.

Quiz 6: Entrepreneurship and Small Business