Innovation and Entrepreneurship

Which of the following are potential outcomes of a poorly managed credit card?

1)An increase in the interest rate 2)Possible bankruptcy of a firm

Which of the following large firms have been a leading source of venture capital in the United States?

1)Cisco 2)Intel 3)Microsoft

A(n) _____ _____ fund is a fund that is usually organized as a limited partnership and is organized to make significant equity investments in high-growth new ventures.

1)Venture 2)Capital

Which account should be used when there is an expense too small to write a check for or when a check is simply inappropriate?

Petty cash register

_____ credit is a form of nonequity funding for physical assets as well as the actual supplies purchased.

Supplier

Which of the following is a disadvantage of factoring for a new business?

The business will not receive the full amount of debt that is due to it.

The __________ of a firm is a powerful asset that should be used as a fine-grained tool to provide data about when and how inventory is needed.

Accounting system

Which form of debt is almost always tied personally to the founders, thus exposing them to personal bankruptcy?

Credit cards

TRUE/FALSE: Both a check register and a petty cash register are required by an entrepreneur to form an annual record of all expenses.

TRUE

Which of the following typically issue grants?

1)Private founders 2)Government

A key aspect of how the funding will be used is found in the information provided by the business, and that comes from:

1)The data flow management 2)The accounting system

Identify the issues a new business uses to determine the quality of accounts receivable.

1)The size of the transaction. 2)The debtor's credit rating.

Which of the following are characteristics of credit cards as a form of nonequity investment?

1)They are generally tied to a much higher interest rate than that of a bank loan. 2)They typically have a set upper limit.

TRUE/FALSE: In the case of business failure, a debt must be paid back prior to any equity investors receiving a distribution.

TRUE

TRUE/FALSE: When considering funding, a firm needs to evaluate not only the amount provided but also the sources of that funding.

TRUE

Identify the typical advantages of having suppliers invest in a new business.

1)Suppliers do not aim to take the business over if it does particularly well. 2)Suppliers refrain from trying to run the business.

What is the generic term used to describe any type of nonequity funding tied to the business?

Debt

Which of the following are sources of nonequity capital to start a business?

1)Debts 2)Grants

Which of the following are potential business angels?

1)Individuals with significant inheritances. 2)High-income executives of large organizations. 3)Entrepreneurs who have cashed out. 4)Professionals such as doctors or lawyers.

Why do companies invest in a new venture with the idea of ultimately purchasing the venture?

1)It is one of the least expensive means for companies to try out new ideas. 2)It helps the companies maintain access to the latest thinking in the field.

Inventory should be taken at scheduled times during the year and an exact match should be completed between:

1)Units sold 2)Starting inventory 3)Ending inventory

What type of lending involves the bank estimating the residual value of the equipment if the bank had to repossess the equipment and then lend the business a percentage of the difference between that number and the sale price?

Asset-based lending

TRUE/FALSE: Prior to allowing any nonfounder to invest in a new business, the entrepreneur should have a fair and valid estimation of the value of his or her company.

TRUE

Which of the following are examples of groups typically targeted for grants?

1)Women-owned businesses 2)Veterans

Which form of funding is used by a business to conserve cash and maintain the latest versions of whatever equipment is available?

Asset lease

Which form of equity investors refers to high-net-worth individuals that invest widely in business?

Business angels

Which of the following key reports is the master system for tracking the activity of the business?

Chart of accounts

Which of the following is NOT true with regard to managing the flow of data?

Data measurement methods must be complex

_____ is a major source of nonequity financing and can come from banks, credit cards, or suppliers.

Debt

Which funding option traditionally involves selling a percentage of the business to an outside party?

Equity investment

TRUE/FALSE: There is no need to treat a loan from family as a contractual agreement.

FALSE

What method of inventory control seeks to minimize excess capital investment in inventory by having it present only shortly before it is used?

Just-in-time inventory

Where does funding typically start for most new businesses?

The founder's personal resources.

Which of the following is NOT a common form of debt for a new business?

Venture capital

Banks will lend money for the establishment and maintenance of inventory by arranging a revolving line of _____.

credit

Any form of capital infusion that must be paid back with interest is called _____.

debt

When someone provides funding in return for some ownership in the new business, it is referred to as a(n) __________.

equity investment

Banks have traditionally been a major source of funds for:

established firms.

When accounts receivable are sold at a discount to another company to receive immediate cash, it is referred to as _____.

factoring

The accounting system and the data flow management provide information on how the _____ will be used by the business.

funding

A(n) _____ is simply money designed to help the new business begin operations with no expectation of repayment.

grant

In the long run, the cost of capital for nonequity funding is generally __________ that of equity investment.

less than

It is important to record and balance the company account on at least a _____ basis.

monthly

A separate accounts _____ record should be maintained for each creditor.

payable

Which accounting record tracks time for hourly workers and attendance for salaried employees?

payroll

Accepting __________ can limit a firm's ability to shop around for a cheaper source.

supplier's credit

Besides banks, finance companies, and friends and family, another source of nonequity loans come from:

the founders.

Identify the characteristics of loans as a source of funding for new businesses.

1)They are often repaid monthly from cash flow. 2)They are secured by assets or a personal guarantee.

Which of the following are advantages of asset leasing for a new business?

1)The business is able to acquire the assets that it needs to begin operations with a minimal cash outlay. 2)The company is not stuck with an aging asset as the entrepreneur is able to trade up.

What are the key financial issues involved with starting a business?

1)The funding and the funding level of the firm. 2)The establishment of an accounting system. 3)The flow of information in the new business.

TRUE/FALSE: To calculate the maximum amount to obtain in outside financing, it is advisable for an entrepreneur to calculate the entire cash flow projection by adding in all equity investments.

FALSE

Which type of funding involves a contractual agreement whereby the business receives some amount of money that must be repaid over a specified period of time at a specified interest rate?

Loan

Which of the following are considered alternative sourcing tools for funding a business?

1)Crowdfunding 2)Crowdsourcing

__________ involves entrepreneurs making a pitch on an Internet site and letting potential investors know what they will receive for their funding, which might be equity but is more often a product, service, or a gift.

Crowdfunding

What form of debt financing allows for a unique positive cash flow situation by allowing up to a 25-day delay in payment?

Credit cards