Entrepreneurship - Chapter 14 Pre-Quiz

Which of the following describes angel investors? A.) They are wealthy individuals who invest in companies in relatively early stages of development. B.) They are state-run organizations that buy stakes in companies in the early stages of development. C.) They are individuals who act as brokers to help connect owners to organizations that provide funding. D.) They are government organizations that help small-scale companies grow. E.) None of the above

A.) They are wealthy individuals who invest in companies in relatively early stages of development.

There are two general sources of gift financing: A.) Consumer and commercial banks B.) Institutional and personal. C.) Friends and family D.) Angel and venture investors E.) None of the above

B.) Institutional and personal.

A measure of the amount of debt relative to total investment is called cost of capital.

FALSE

Which of the following is an example of debt financing? A.) Angels B.) Incubators C.) Tax abatement D.) Crowdfunding E.) None of the above

B.) Incubators

Which of the following ways does borrowing help increase potential profits? A.) By allowing less debt to be included in the capital mix B.) By increasing the weighted average cost (WAC) of the business C.) By providing capital funds for additional business opportunities D.) By increasing the cost of capital of the business E.) None of the above

C.) By providing capital funds for additional business opportunities

Knowing one's personal worth is not important when starting a business.

FALSE

When a business enters a phase of rapid growth, one of the challenges it faces is that very few sources of money are available to support its growth.

FALSE

Borrowing money for capital investment enhances the potential for higher rates of return for the owners.

TRUE

Giving a gift has tax implications.

TRUE

Obtaining outside equity financing can only be done if your business is organized as: a partnership, a corporation, or a limited liability company.

TRUE