Entrepreneurship Chapter 10 Review
Big Apple Circus has developed partnerships with companies such as Coca-Cola to feature their products. Coca-Cola contributes to the selling of its products at the Big Apple Circus by contributing advertising dollars, providing product, favorable pricing of the product, and repairing dispensing equipment. This partnership is an example of ____________ financing.
creative
___________ is best described as finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost-cutting, or any means necessary.
Bootstrapping
_____ is the term attached to the general philosophy of minimizing startup expenses by aggressively pursuing cost
Bootstrapping
_____ are individuals who invest their personal capital directly in start-ups.
Business angels
Factoring is one way for a business to generate cash, which is best described as _____________.
a financial transaction whereby a business sells its account receivable to a third party at a discount in exchange for cash
The most common sources of equity funding are ___________.
angel investors, private placement, venture capital, and initial public offerings
Typically, the seed money that gets a company off the ground comes from the founders' own pockets. There are three sources of money in this area: personal funds, friends and family, and _____.
bootstrapping
A company's ___________ is the rate at which it is spending its capital until it reaches profitability.
burn rate
A company's _____ is the rate at which it is spending its capital until it reaches profitability.
burn rate
A firm's negative real-time cash flow is its _____.
burn rate
Gina's Catering expects to spend $30,000 of its $50,000 capital until it reaches profitability. This is Gina's Catering's _________.
burn rate
All of the following are examples of bootstrapping methods except:
buying new instead of used equipment
The percentage of the profits the venture capitalists receive is called the ___________.
carry
The most common sources of debt financing are ____________.
commercial banks and the Small Business Administration
Commerical banks and the Small Business Administration are the most common sources of _____________.
debt financing
When entrepreneurs are starting the process of properly preparing to raise debt or equity financing, they would first ____________.
determine precisely how much money the company needs
The ______ process refers to investigating the merits of a potential venture and verifying the key claims made in the business plan.
due diligence
Big Apple Circus develops its own novelties to sell, does its own merchandising, operates its own concessions, and licenses its brand to other vendors. These are all examples of how an organization can finance through ____________.
earnings
Jim Roper, Big Apple Circus' Director of Circus to Go and Concessions, stated that Big Apple Circus is largely funded through its own revenue stream, which consists of ticket sales, food and beverages, and concessions. Big Apple Circus is raising capital through ___________.
earnings
While developing a strategy for engaging potential investors or bankers, the lead entrepreneur should prepare a brief, carefully constructed statement outlining the merits of the business opportunity. This statement is referred to as a(n) ____________.
elevator speech
A(n) _____ is a brief, carefully constructed statement that outlines the merits of a business opportunity.
elevator speech (or pitch)
Although it is not considered debt financing, companies may also generate cash by __________, which is a financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for cash.
factoring
Anthurium Florals needed cash and so it sold its $50,000 in accounts receivable to Omega Financing at a 20 percent discount. The financial transaction that Anthurium Florals did is called _____ .
factoring
Bootstrapping is best described as ______________.
finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost-cutting, or any means necessary
An initial public offering (IPO) is best described as the _____________.
first sale of stock by a firm to the public
According to Gavin Berger, Big Apple Circus' Executive Director, Big Apple Circus receives significant funding from foundations, corporations, and individuals who want to give back. These are examples of financing with _________.
gifts and grants
According to Scott O'Donnell, Big Apple Circus ' Vice President and General Manager, seventy percent of Big Apple Circus' overall revenues come from the touring unit, with thirty percent coming from donors, the National Endowment for the Arts, and different foundations. The donations are examples of __________ financing.
gifts and grants
In June 2017, Blue Apron made a first sale of its stock to the public. This was Blue Apron's ________.
initial public offering
Many entrepreneurs launch their firms with the intention of funding all their needs ____.
internally
A(n) _______ bank is an institution that acts as an underwriter or agent for a firm issuing securities.
investment
Many entrepreneurs go about the task of raising capital haphazardly because they ____________.
lack experience in this area
There are three reasons that most entrepreneurial ventures need to raise money during their early life: cash flow challenges, capital investments, and _____.
lengthy product development cycles
The investors who invest in venture capital funds are called ______.
limited partners
In a(n) _____, a borrowing "cap" is established and borrowers can use the credit at their discretion.
line of credit
A(n) _____ is an occurrence that converts some or all of a company's stock into cash.
liquidity event
The three most common _____ for a new venture are when it goes public, finds a buyer, or merges with another company.
liquidity events
Carry is best described as the _____________.
percentage of the profits the venture capitalists receive
The vast majority of founders contribute ______________ funds, in the form of personal savings or credit, along with sweat equity to their ventures.
personal
When a venture has high risk with an uncertain return (characterized by weak cash flow, high leverage), its most appropriate source of funding is ______.
personal funds, family and friends, and/or bootstrapping
Manzana Foods raised capital through a direct sale of $5 million worth of securities to Brookheimer Partners, an institutional investor. This is an example of a ______.
private placement
Equity investors do not ____________.
require money to be paid back
Wanderberg Machines went on a whirlwind tour that consisted of meetings in 12 key cities where the firm presented its business plan to groups of investors. This tour was a ______.
road show
The SBIR and STTR programs are best described as _____________.
sources of early-stage funding offered by the U.S. Government for technology firms working on projects in specific areas
John invested $25,000 in Marlo Ventures, a home flipping business. While Sammy invested $20,000 in the venture, Daniel did not put in any money in the venture, but became a 50 percent equity owner because he had contributed enormous time and expertise into the venture. The 50 percent is ________ equity that represents the value of the time and effort that Daniel put into Marlo Ventures.
sweat
Two sources of early-stage funding offered by the U.S. Government for technology firms working on projects in specific areas are _____________.
the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs
Crowdfunding is best described as _____________.
the practice of funding a project by raising monetary contributions from a large number of people, typically via the Internet
According to Fundable, the average investment made by friends and family in a start-up is $____.
23,000
_______ allows entrepreneurs to raise money in exchange for some type of amenity or reward.
Rewards-based crowdfunding
The ______ Act is a federal law that was passed in response to corporate accounting scandals involving prominentcorporations, including Enron and WorldCom.
Sarbanes-Oxley
Anthurium Florals borrowed $100,000 from a bank that had to be paid back at $10,000 per month with a 6 percent interest. This was a ______.
single-purpose loan
An elevator speech is typically prepared during which step of the debt or equity financing process?
Step 3: Developing a strategy for engaging potential investors or bankers
All of the following should be avoided when it comes to funding ventures through friends and family except:
Stipulating the terms of the loan with a set repayment schedule.
When it comes to funding ventures through friends and family, which of these would be the best to do?
Stipulating the terms of the loan with a set repayment schedule.
Raising money for a start-up is _______
a balancing act
It typically takes between ______ to develop an electronic game.
2 and 4 years
According to Fundable, ___ percent of start-ups are funded by friends and family.
38
The prototypical business angel is typically __ years old.
50
According to Fundable, _____ percent of start-ups are funded through the entrepreneur's personal savings and credit.
57
Which of the following is NOT an example of a bootstrapping method?
Buy new instead of used equipment
_____ is the practice of funding a project or new venture by raising monetary contributions from a large number ofpeople, typically via the Internet.
Crowdfunding
Which of the following statements regarding how entrepreneurs go about the task of raising capital is most accurate?
Entrepreneurs lack experience in this area.
______ financing means exchanging partial ownership of a firm, usually in the form of stock, for funding.
Equity
____________ is not one of the sources of equity funding.
Factoring
Which of the following is NOT a topic you should speak about in a 60-second elevator pitch?
How quickly you will be profitable.
A(n) ______ is the first sale of stock by a firm to the public.
IPO
____ is when the lender provides a business with a lump sum of money in exchange for a share of future sales.
Merchant cash advance
____________ is not one of the reasons most entrepreneurial ventures need to raise money during their early life.
Negative sweat equity
Which is a major advantage of obtaining a loan as opposed to equity funding?
None of the ownership of the firm is surrendered.
_____________ is not one of the reasons most entrepreneurial ventures need to raise money during their early life.
Rapid product development cycles
Which is not one of the sources of equity funding?
SBA guarantees
The most common sources of debt financing are commercial banks and _______.
Small Business Administration - guaranteed loans
The vast majority of founders contribute personal funds along with _______ to their ventures.
The vast majority of founders contribute personal funds along with _______ to their ventures.
Entrepreneurs need to have as full an understanding as possible of the alternatives that are available with regard to raising money. And raising money is _________.
a balancing act
