ENTR 101 Chapter 8

53. According to Forbes, the net worth of the richest _____ Americans was $2.29 trillion ($5.73 billion per person).

400

7. Frugality is deemed a bootstrapping technique.

True

9. Trade credit is given by suppliers who sell goods on account.

True

52. An informal risk capitalist is referred to as

a business angel.

56. Financing includes all of the following except

equitable payback.

35. Which of the following is a source of capital for entrepreneurs?

equity

71. Informal investors find projects to invest in through

networks of friends.

41. Equity capital is

not a loan but a form of stock.

37. Which of the following terms is synonymous with social lending?

peer-to-peer (P2P) lending

51. A disadvantage of debt financing is

regular interest payments.

75. When going public with public offerings an advantage might be the

size of the company's capital amount.

54. SBIC stands for

small-business investment companies.

44. Which of the following is not a major trend that has occurred in venture capital over the last few years?

stronger small start-up investments

28. The business plan is a critical element in a new

venture proposal. - True

50. Approximately how many commercial banks are there in this country?

about 5,500

31. Which of the following is a type of equity financing?

common stock

68. One of the advantages of public offerings is

image.

46. Which of the following would be most commonly used for intermediate term financing?

leasing companies

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

less specialized and more homogenous funds.

72. According to the text, which of the following could be considered a "deal killer" by a venture capitalist?

the excessive founder salaries

45. Longterm debt is used for

the purchase of property or equipment.

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

trade credit

33. _____ bank loans are made on a discounted value of the receivables pledged.

Accounts receivable financing

1. Corporate venture capital can offer strategic and tactical advice, an operating budget, and credibility but started to decline in 2017, and this trend is expected to continue.

False

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

False

19. The venture capital pool is rapidly declining due to overfunding.

False

2. Only a small number of informal risk capitalists are in the market today.

False

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

False

30. Large ventures often use private placements as a method of raising capital.

False

6. Entrepreneurs with new ventures often use debt financing out of choice, not necessity.

False

8. Peer to-peer lenders are friends of the entrepreneur who want to invest in the new venture.

False

79. Which of the following is an important question for the entrepreneur to ask when evaluating the venture capitalist?

How many deals has the firm actually made in this field?

74. Which of the following statements about raising capital is true?

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

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

Rule 503

32. SEC stands for the

Securities and Exchange Commission.

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

They are interested in managing firms themselves.

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

True

12. A good idea is important, but a good management team is even more important.

True

13. The average size of social loans is around $17,000.

True

14. Innovation has become more global and is no longer the exclusive domain of Silicon Valley and Route 128 in Boston.

True

15. A method of raising capital is through the private placement of securities.

True

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

True

23. When using P2P lending, one potential danger may be an uncertain regulatory environment.

True

24. P2P lenders charge fees for brokering and servicing loans and collect penalties for late payments.

True

29. The most common sources of debt financing are commercial banks.

True

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

True

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

True

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

What is it like to work with their firm?

49. Which of the following is not a stage of the evaluation process?

beta-testing

21. Common stock is the least basic form of ownership.

False

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

False

16. Venture capitalists are quick to invest.

False

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

False

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

False

67. _____ is one of the disadvantages of going public.

Shareholder pressure

55. Advantages of debt financing include all of the following except

regular interest payments.

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

private placement

61. 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?

20. Sophisticated investors are wealthy individuals who invest more or less regularly in new or early

and late-stage ventures. - True

48. Which of the following was a significant contributor to job growth, with the creation of 263,950 new jobs in the United States in 2016?

angel investments

60. Which of the following is more likely than the others to be deemed a potential danger of social lending?

business plan disclosure

63. Short term debt is paid back

in one year.

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

insurance companies

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

insurance companies

36. The main objective of Regulation D is to

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

43. Venture capitalists are experienced professionals who provide a full range of services for new ventures including

management consulting.

40. Which of the following is not one of the eight critical factors that venture capitalists use in the evaluation of new ventures?

managerial structure

57. Financial equity instruments, which give investors a share of the ownership, may include

preferred stock.

11. Crowdfunding provides entrepreneurs with access to beta

testing and market feedback. - True

58. Many new ventures find that debt financing is

necessary.

64. When securing a bank loan, which of the following is not a question an entrepreneur should be prepared to answer?

What is the price of your product?

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

a product prototype.

39. Which of the following is not typically identified as a bootstrapping technique?

hiring seasoned veterans

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

technology angels

42. The Regulation D exemptions include all of the following except

Rule 503—placements of less than $500,000.

66. The most common source of debt financing is

commercial banks.

26. Social lending sites are different from so

called microlending sites. - True

69. Because of how they are structured, traditional industries such as textiles, furniture manufacturing, and clothing manufacturing commonly use which of the following debt financing sources?

factoring

65. Venture capital in the United States has been highest in which of the following?

health care

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

What interest rate did you have in mind?