MGMT 4252- Exam 3
Which type of risk-capital market is available as a funding source only for high-potential ventures?
Public equity market
Mortgage financing is another term for:
real-estate asset-based financing.
Business angels usually find their deals through:
referral sources.
Market development strategy
strategy to grow by selling the firms existing products to new groups of customers
Asset base for loans
tangible collateral values at more than the amount fo money borrowed
equity partnership
the sponsoring company and the limited partners form a new jointly owned corporation
Debt to equity
total liabilites/ stockholders equity Higher percent of debt the higher the risk to the creditors
Debt ratios
total liabilities/ total assets
Priciple of analysis
understanding how tiem is currently being allocated, and where it is being inefficiently invested
Royalty rates rang from ?
6-10 percent
Equity Financing
Obtaining funds for the company in exchange for ownership. Does not require collateral and offers the investor some form of ownership in the venture.
Venture capital markets
One of the risk capital markets consisting of formal firms
Least expensive fund in terms of cost and control? Few is any entrepreneurs use this
Personal funds
Additional fee in debt financing is called...
Points
Financial ratios
control mechanism to test the financial strength of the new venture
SBIR grant program
grants from the U.S. governmetn to small technology based businesses
Which funds are frequently employed...Internal or external
internal fund
The least liquid current asset, _____, is eliminated when calculating the acid test ratio.
inventory
horizantal integration
occurs at the same level of the value added chain but simply involves a different but complementary value added chain -a firm that manufactures washing machines might manufacture detergent '
public equity markets
one of the risk capital markets consisting of publicly owned stocks of companies
Diversification strategy
A strategy to grow by selling a new product to a new market
Business angels typically invest what amount in the businesses they finance?
$100,000 - $500,000
Acid ratio
(current assets-inventory) / liabilities 1:1 ratio is favorable
Activity Ratio
Accounts receivable/average daily sales 20 day payment required e=means customers pay on time
Private Investors are also known as ....?
Angels
________ financing does not require any collateral.
Equity
T/F Any patent rights on technology developed in SBIR grants are the property of the federal government
False
T/F Banks will lend a company up to 50% of their account receivable value.
False
T/F SBA guaranteed loans are guaranteed for 100 percent of the loan amount.
False
T/F Venture capitalists tend to avoid investment proposals that are referred from lawyers and accountants.
False
T/F Private venture capital firms use both state and federal grant money to invest in other businesses.
False
Principles of efectiveeness
Focus on the most important issue, even when under pressure
SBA (small business administration)
Guarantor of loans made by private and other institutions
Inventory tunrover
High turnover is favorable, venture is able to sell their inventory quickly Cost of goods sold/ inventory
Risk Capital MArkets
Markets providing debt and equity to nonsecure financing situations
Debt Financing (asset-based financing)
Method used to involving an interest bearing instrument, usually a loan, the payment of which is only indirectly related to the sales and profits venture. Sometimes requires that some asses (car, house, inventory, plant, machine) be used as collateral
Research & development limited partnership
Money given to a firm for developing a technology that involves a tax shelter
Under the ____________ program, federal agencies with budgets over $1 billion are required to set aside 0.3 percent for small businesses.
Small Business Technology Transfer
Which grant program requires partners at universities or other non-profit institutions?
Small Business Technology Transfer
SBIC firms
Small companies with some government money that invest in other companies
Basic 7a Loan Guaranty
The SBA's primary business loan program.
T/F If there is a significant disparity between the offering price of the shares and the price paid for shares by officers, directors, or founding stockholders, a dilution section is necessary in the prospectus.
True
T/F The SBA 7(a) loan program has a maximum loan amount of $5 million.
True
T/F When a bank grants a line of credit, a "commitment fee" is assessed at the start of the loan.
True
T/F With the enactment of the Sarbanes-Oxley Act in 2002, the expense and administrative responsibilities of being a public company, as well as the liability risks of officers and directors, are significantly greater.
True
Principle of desire
a recognition of the need to change personal attitudes and habits regarding the allocation of time
In ____ the entrepreneur sells equipment to the lender then arranges for its continued use.
a sale-leaseback arrangement
backward integration
a step back (up) in the value added chain toward the raw materials -firm becomes its own supplier
foward intergration
a step foward (down) on the value added chain toward the customers -firm becomes its own buyer
Product development strategies
a strategy to grow by developing and selling new products to people who are already purchasing the firms existing products
Penetration strategy
a strategy to grow by encouraging existing customers to buy more of the firms current products
Principle of teamwork
acknowledgment that only a small amount of time is actually under ones control and that most of ones time is take up by others
Informal risk capital market
area of risk captial markets consisting mainly of individulas