Quiz 4

Venture capitalists are experienced professionals who provide a full range of service including:

Management consulting

When going public (public offering of a stock) an advantage might be:

Size of the company's capital amount

Factoring is

the sale of accounts receivable at discounted values

Acme Company sells windshield wiper blades and has fixed costs of $5,000. The price of each wiper blade is $10 and the cost to produce is 5$ per wiper blade. What is the contribution for Acme Company

$5

Vegan steaks had the best year ever, with sales of $4,500,000 and operating profit of $950,000. The previous year's operating profit was $900,000. They contributed their success to the purchase of a new machine. That machine was purchased for $20,000 the year before and cost Vegan Steaks $5,000 to operate. The balance sheet at the end of the showed accumulated depreciation of $4,000. Calculate the ROI for the year.

170%

Arrowhead Inc. sells hatchets and has fixed costs of $12000. The price of each hatchet is $13 and the cost to produce is $7 per hatchet. What is the break-Even Quantity for arrowhead Inc.?

2000

Abby runs a coffee shop and needs a new all in one drink machine to replace her aging equipment. She calculates that she will be able to offer more types of drinks with the new machine, increasing her sales, and can eliminate the repair costs she currently has with her old equipment. The cost of the new machine is $10,000 and she determines that her benefits in the first year will be $15,000 between increased sales and decreased repair costs. What is the return on investment in the first year?

50%

which of the following is not a myth about venture capitalists

a good management team is more important than a good idea to a venture capitalist

which of the following would be commonly used for medium term financing

finance companies

cash flow measures what activity in a business

income and expenses

the use of debt to finance a new venture involves a payback of the funds plus ___________?

interest

If the return on Investment (ROI) ratio is negative, the cost of the investment,

is greater than the gains

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?

using a leverage break-even strategy, higher debt means that

it will take longer to break even

one of the advantages of public offerings is

liquidity

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

low interest rates reduce the opportunity cost of borrowing

many new ventures find that debt financing is

necessary

which of the following is an advantage of debt financing

no relinquishment of ownership is required

any time one has money, there is a cost that corresponds with the decision of how to spend the money. This cost is called

opportunity cost

short term debt is

paid back on 1 year or less

Equity Capital is often raised through:

public stock offerings

a disadvantage of debt financing is

regular interest payments

one of the disadvantages of equity financing is

requires sharing the ownership and profits with the funding source

___________ is one of the disadvantages of going public

shareholder pressure

under a conservative break even strategy

the company uses its equity to help pay for regular operating expenses.

opportunity cost is

the highest value surrendered when a decision to invest is made.

which of the following statements is not true of venture capitalists

they are interested in taking over the firm and managing it

which of the following is not a characteristic of an angel investor

they invest only in high tech industries

Which of the following is not a characteristic of a venture capitalist

they only invest in business in their local geographical area

breakeven is defined as the point where

total costs are paid by the income from the sales

Contribution margin is

what is left of the price to pay for fixed costs after paying variable costs

the most common source of debt financing is

commercial banks

which of the following terms is not synonymous with social lending

commercial lending

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

do you plan to leave the country soon?

An informal risk capitalist is referred to as

Angel Investor

which of the following is not a danger of social lending?

Cost and complexity of setting up the solicitation site

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

Factoring

Which of the following is not a type of debt financing

Private Placement

finance companies are asset based lenders who lend money against all of the following assets except:

Real Estate

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

business plan disclosure