ENT4424 Final Exam

Which of the following is the most expensive source of receivables financing? - Commercial banks - Commercial Finance Company - Initial Public Offering (IPO) - Factoring

Factoring

A venture should look for capital only when it has a serious cash shortage. T/F

False

By staging their capital contributions, venture capitalists will lose the right to abandon a project -- even if the prospects look dim. T/F

False

Enterprising families focus on maintaining their local advantage; safeguarding their brands, assets, and customers; and, honing their operational efficiencies. T/F

False

Leasing provides the flexibility of returning equipment after the lease period if it is no longer needed, BUT NOT if that equipment has become technologically obsolete. T/F

False

Most causes of company failure are external and not found within company management. T/F

False

Which of the following would NOT be considered a strong signal for predicting trouble for a company? - Changes in behavior of the lead entrepreneur - Change in management or advisors - Increased Research and Development expenditures - Inability to produce financial statements on time

Increased Research and Development expenditures

Which of the following is NOT a characteristic of a successful deal. - They are simple - They are based primarily on legalese rather than on trust - They are robust - They improve chances of success for the venture

They are based primarily on legalese rather than on trust

What is the advantage of dealing with a commercial finance company? - Better interest rates than commercial banks - No prepayment penalties - They will make loans that commercial banks will not - Personal guarantees are usually not required

They will make loans that commercial banks will not

Which of the following is the most probable source of debt capital for a new business? - Commercial banks - Trade Credit - Mezzanine Capital - Initial Public Offering (IPO)

Trade Credit

Which group of creditors below has the lowest claim in a bankruptcy situation? - Secured Lenders - Commercial banks - Trade Debt - Leasing Companies

Trade Debt

Commercial banks primarily focus on existing businesses with long and substantial financial track records. T/F

True

Most advisors view outright sale as the ideal route to harvest because up-front cash is preferred over most stock. T/F

True

Most often, family cash investments are given based on altruistic family sentiments rather than having more formal investment criteria. T/F

True

Shaping a harvest strategy is an enormously complicated and difficult task. T/F

True

The prospect of bankruptcy can provide a foundation for bargaining with creditors in a turnaround situation. T/F

True

The rate of return (ROR) required by the investor can affect the investor's required share of the ownership. T/F

True

The single most important criterion for selecting investors is what they can contribute to the value of the venture beyond just financing. T/F

True

What is the primary source for decreasing expenses in a troubled company for a turnaround plan? - Auditing Reduction - Workforce Reduction - Trade Debt Reduction - Advertising Reduction

Workforce Reduction

A typical informal investor (Angel) will invest from ________ in any one deal. - $5,000 to $10,000 - $10,000 to $250,000 - $100,000 to $500,000 - $500,000 to $1M

$10,000 to $250,000

Most venture capital investments are in the range of ________ . - $50,000 to $500,000 - $100,000 to $1 million - $500,000 to $1.5 million - $100 million to $200 million

$500,000 to $1.5 million

Between ________ of all informal (or non- venture capital) funding comes from family. - 5-10% - 10-20% - 20-30% - 30-80%

30-80%

How long is the typical expected holding period for a first stage venture capital investment? - 3-5 years - 4-7 years - 5-10 years - 20 years

5-10 years

The financial mindset for enterprising does NOT include which of the following characteristics: - A commitment to generating next-generation entrepreneurship. - A willingness to stick with the existing business model - A desire to grow by creating new revenue streams with higher returns. - A willingness to sell and redeploy assets to seek higher returns.

A willingness to stick with the existing business model

Which of the following harvest options is viewed as a positive motivational device because it usually creates widespread ownership of stock among employees? - Initial Public Offering (IPO) - Employee Stock Ownership Plan (ESOP) - Outright Sale - Strategic Alliance

Employee Stock Ownership Plan (ESOP)

The entrepreneurial methods for enterprising does NOT include which of the following characteristics: - Systematically searching for and capturing new investment opportunities. - Seeking new opportunities beyond the core business. - Making significant changes in products, services, markets, and customers. - Maintaining the existing business model by implementing incremental change

Maintaining the existing business model by implementing incremental change

A(n) ______ is when a founder can gain liquidity from a business by selling it to existing partners or to other key managers in the business. - Initial Public Offering - Management Buyout (MBO) - Capital Cow - Merger

Management Buyout (MBO)

Which harvest option can have the negative attribute of forcing the leadership team to focus on short-term profits and performance results? - Public Offering - Management Buyout (MBO) - Employee Stock Ownership Plan (ESOP) - Capital Cow

Public Offering

When pushed by a potential investor to discuss what other firms or angels you are talking to, you should: - Respectfully decline - Reveal only the strongest other prospects - Reveal only the weakest prospects - Be up-front and tell them what they want to know

Respectfully decline

Which valuation method looks at different multiples (such as earnings, free cash flow, and revenue) of recent investments in similar firms? - Venture Capital Method - Fundamental Method - First Chicago Method - Rule-of-Thumb Method

Rule-of-Thumb Method