MGT 241 Midterm Ch. 8

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Frugality is deemed a bootstrapping technique.

True

History and nature of the company, capital structure, and description of any material contracts are just a few examples of the specific detailed information that must be presented about a firm that is going public.

True

Informal risk capitalists are those who have already made their money and now seek to help new ventures.

True

Sophisticated investors are wealthy individuals who invest more or less regularly in new and/or early- and late-stage ventures.

True

The business plan is a critical element in a new-venture proposal.

True

Venture capitalists are a valuable source of equity funding for new ventures.

True

Which of the following is not a question commonly asked by banks of entrepreneurs?

What interest rate did you have in mind?

Which is one of the most important questions for entrepreneurs to ask regarding venture capitalists?

What is it like to work with their firm?

An informal risk capitalist is referred to as:

a business angel.

Which of the following would be most commonly used for short-term financing?

trade credit

The most common source of debt financing is

commercial banks.

Which of the following would be most commonly used for medium-term financing?

finance companies

Of the following, which is not typically identified as a bootstrapping technique?

hiring seasoned veterans

When starting a business, which of the following sources of financing are least likely to be used?

insurance companies

Criteria that venture capitalists use in evaluating new venture proposals include:

the characteristics of the product or service.

When starting a business, which of the following sources of financing are most likely to be used?

trade credit

Sources of debt financing include trade credit, accounts receivables, factoring, and finance companies.

True

The average size of a social loan is around $7,000.

True

Venture capitalists are slow to invest.

True

Which of the following is not one of the most common questions typically required to be answered by entrepreneurs seeking funding?

What exact date will you repay the money?

Informal investors find projects through

a network of friends.

How many people in America have net worth in excess of $1 million?

about 500,000

Which of the following does not represent a category of angel investors?

amateur angels

Which of the following terms is not synonymous with social lending?

commercially viable lending

At start-up time, forms of financing includes all but which of the following?

equitable payback

Private placement is a method of raising capital through the private placement of securities.

True

Evaluation of new-venture proposals includes all the following processes except

a product prototype

Major trends in the venture capital field today include all of the following except

less specialized and more homogenous funds

The main objective of Regulation D is to

make it easier and less expensive for small ventures to sell stock.

Many new ventures find that debt financing is

necessary.

SBIC stands for the

small-business investment companies

Which of the following would be most commonly used for long-term financing?

insurance companies

One of the advantages of public offerings is

liquidity.

Venture capitalists are experienced professionals who provide a full range of service for new ventures including

management consulting.

The Regulation D exemptions include all of the following except:

placements in excess of $l0 million.

Which of the following is not a type of debt financing?

private placement

Regulation D defines separate exemptions that are based on the amount of money being raised. Which is not a rule that accompanies these exemptions?

rule 503

When going public specific detailed information that must be presented includes

the capital structure of the company.

Social lending sites are different from so-called microlending sites.

True

SEC stands for the

Securities and Exchange Commission.

__________ is(are) one of the disadvantages of going public.

Shareholder pressure

Which of the following statements is not true of venture capitalists?

They are interested in trying to manage firms themselves.

Which is not a stage of the evaluation process?

evaluation of the business plan

When accounts receivable are bought from a company for capital funding it is called

factoring.

Public offering is a term used to refer to corporations taking public donations to raise capital.

False

Venture capitalists are quick to invest.

False

The most common sources of debt financing are commercial banks.

True

Advantages of debt financing include all of the following except:

regular interest payments.

Equity financing is money invested in the venture with legal obligations to repay the principal amount of interest or interest rate on it.

False

Most venture capital funds later stages of venture development, not the start-up (or seed) stage.

False

Equity capital is

not a loan but a form of stock.

Short-term debt is

paid back in one year.

A disadvantage of debt financing is

regular interest payments.

When going public with public offerings an advantage might be

size of the company's capital amount.

How do informal investors find projects to invest in?

networks of friends

Which of the following is a type of equity financing?

common stock

Which is an important question for the entrepreneur to ask when evaluating the venture capitalist?

Is the person someone with whom the entrepreneur can work?

Which of the following is a true statement about raising capital?

It often takes a great deal of time to raise capital.

Approximately how many commercial banks are there in this country?

about 7,000

The entrepreneur should ask the venture capitalist questions.

an unlimited number of

Long-term debt is used for

both a and b.

Venture proposals are often rejected due to significant deficiencies in

both a and b.

Of the following, which is more likely than the others to be deemed a potential danger of social lending?

business plan disclosure

Because the advantages of going public outweigh the disadvantages, it is in a corporation's best interest to go public.

False

A potential danger of social lending is the implication that social loans may be viewed as gifts and taxed accordingly.

True

When securing a bank loan an entrepreneur should be prepared to answer which of the following questions except?

What is the price of your product?

One of the most frequently used criterion in evaluating new ventures, is the ability of the entrepreneur to sustain intense effort.

True

Which of the following is (are) sources of capital for entrepreneurs?

equity

Entrepreneurs are rarely able to set up a business without investment funds or bank loans.

False

Regulation D augments the regulations for reports and statements required for selling stock to private parties, friends, employees, customers, relatives, local professionals.

False

The venture capital pool is rapidly declining due to overfunding.

False

There is no way for the venture capitalist adequately to evaluate a new venture.

False

There is only a small number of informal risk capitalists in the market today.

False

Venture capital firms want to own control of the firms in which they invest.

False

Venture capitalists are usually satisfied with a reasonable return on investments.

False

Venture capitalists need only basic summary information before they make funding decisions.

False

Venture capitalists, surprisingly, require little information before they make an investment.

False

Use of debt to finance a new venture involves a payback of funds plus an interest fee for the use of the money.

True

Informal risk capitalists are often referred to as "business angels."

True

Equity capital is often raised through:

public stock offerings.


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