Entrepreneurship Chapter 10 Review

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Big Apple Circus has developed partnerships with companies such as Coca-Cola to feature their products. Coca-Cola contributes to the selling of its products at the Big Apple Circus by contributing advertising dollars, providing product, favorable pricing of the product, and repairing dispensing equipment. This partnership is an example of ____________ financing.

creative

___________ is best described as finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost-cutting, or any means necessary.

Bootstrapping

​_____ is the term attached to the general philosophy of minimizing startup expenses by aggressively pursuing cost

Bootstrapping

​_____ are individuals who invest their personal capital directly in​ start-ups.

Business angels

Factoring is one way for a business to generate cash, which is best described as _____________.

a financial transaction whereby a business sells its account receivable to a third party at a discount in exchange for cash

The most common sources of equity funding are ___________.

angel investors, private placement, venture capital, and initial public offerings

​Typically, the seed money that gets a company off the ground comes from the​ founders' own pockets. There are three sources of money in this​ area: personal​ funds, friends and​ family, and​ _____.

bootstrapping

A company's ___________ is the rate at which it is spending its capital until it reaches profitability.

burn rate

A​ company's _____ is the rate at which it is spending its capital until it reaches profitability.

burn rate

A​ firm's negative​ real-time cash flow is its​ _____.

burn rate

​Gina's Catering expects to spend​ $30,000 of its​ $50,000 capital until it reaches profitability. This is​ Gina's Catering's​ _________.

burn rate

All of the following are examples of bootstrapping methods except:

buying new instead of used equipment

The percentage of the profits the venture capitalists receive is called the ___________.

carry

The most common sources of debt financing are ____________.

commercial banks and the Small Business Administration

Commerical banks and the Small Business Administration are the most common sources of _____________.

debt financing

When entrepreneurs are starting the process of properly preparing to raise debt or equity financing, they would first ____________.

determine precisely how much money the company needs

The​ ______ process refers to investigating the merits of a potential venture and verifying the key claims made in the business plan.

due diligence

Big Apple Circus develops its own novelties to sell, does its own merchandising, operates its own concessions, and licenses its brand to other vendors. These are all examples of how an organization can finance through ____________.

earnings

Jim Roper, Big Apple Circus' Director of Circus to Go and Concessions, stated that Big Apple Circus is largely funded through its own revenue stream, which consists of ticket sales, food and beverages, and concessions. Big Apple Circus is raising capital through ___________.

earnings

While developing a strategy for engaging potential investors or bankers, the lead entrepreneur should prepare a brief, carefully constructed statement outlining the merits of the business opportunity. This statement is referred to as a(n) ____________.

elevator speech

​A(n) _____ is a​ brief, carefully constructed statement that outlines the merits of a business opportunity.

elevator speech​ (or pitch)

Although it is not considered debt financing, companies may also generate cash by __________, which is a financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for cash.

factoring

Anthurium Florals needed cash and so it sold its​ $50,000 in accounts receivable to Omega Financing at a 20 percent discount. The financial transaction that Anthurium Florals did is called​ _____ .

factoring

Bootstrapping is best described as ______________.

finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost-cutting, or any means necessary

An initial public offering (IPO) is best described as the _____________.

first sale of stock by a firm to the public

According to Gavin Berger, Big Apple Circus' Executive Director, Big Apple Circus receives significant funding from foundations, corporations, and individuals who want to give back. These are examples of financing with _________.

gifts and grants

According to Scott O'Donnell, Big Apple Circus ' Vice President and General Manager, seventy percent of Big Apple Circus' overall revenues come from the touring unit, with thirty percent coming from donors, the National Endowment for the Arts, and different foundations. The donations are examples of __________ financing.

gifts and grants

In June​ 2017, Blue Apron made a first sale of its stock to the public. This was Blue​ Apron's ________.

initial public offering

Many entrepreneurs launch their firms with the intention of funding all their needs​ ____.

internally

​A(n) _______ bank is an institution that acts as an underwriter or agent for a firm issuing securities.

investment

Many entrepreneurs go about the task of raising capital haphazardly because they ____________.

lack experience in this area

There are three reasons that most entrepreneurial ventures need to raise money during their early​ life: cash flow​ challenges, capital​ investments, and​ _____.

lengthy product development cycles

The investors who invest in venture capital funds are called​ ______.

limited partners

In​ a(n) _____, a borrowing​ "cap" is established and borrowers can use the credit at their discretion.

line of credit

​A(n) _____ is an occurrence that converts some or all of a​ company's stock into cash.

liquidity event

The three most common​ _____ for a new venture are when it goes​ public, finds a​ buyer, or merges with another company.

liquidity events

Carry is best described as the _____________.

percentage of the profits the venture capitalists receive

The vast majority of founders contribute ______________ funds, in the form of personal savings or credit, along with sweat equity to their ventures.

personal

When a venture has high risk with an uncertain return​ (characterized by weak cash​ flow, high​ leverage), its most appropriate source of funding is​ ______.

personal​ funds, family and​ friends, and/or bootstrapping

Manzana Foods raised capital through a direct sale of​ $5 million worth of securities to Brookheimer​ Partners, an institutional investor. This is an example of a​ ______.

private placement

Equity investors do not ____________.

require money to be paid back

Wanderberg Machines went on a whirlwind tour that consisted of meetings in 12 key cities where the firm presented its business plan to groups of investors. This tour was a​ ______.

road show

The SBIR and STTR programs are best described as _____________.

sources of early-stage funding offered by the U.S. Government for technology firms working on projects in specific areas

John invested​ $25,000 in Marlo​ Ventures, a home flipping business. While Sammy invested​ $20,000 in the​ venture, Daniel did not put in any money in the​ venture, but became a 50 percent equity owner because he had contributed enormous time and expertise into the venture. The 50 percent is​ ________ equity that represents the value of the time and effort that Daniel put into Marlo Ventures.

sweat

Two sources of early-stage funding offered by the U.S. Government for technology firms working on projects in specific areas are _____________.

the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs

Crowdfunding is best described as _____________.

the practice of funding a project by raising monetary contributions from a large number of people, typically via the Internet

According to​ Fundable, the average investment made by friends and family in a​ start-up is​ $____.

​23,000

​_______ allows entrepreneurs to raise money in exchange for some type of amenity or reward.

​Rewards-based crowdfunding

The​ ______ Act is a federal law that was passed in response to corporate accounting scandals involving prominent​corporations, including Enron and WorldCom.

​Sarbanes-Oxley

Anthurium Florals borrowed​ $100,000 from a bank that had to be paid back at​ $10,000 per month with a 6 percent interest. This was a​ ______.

​single-purpose loan

An elevator speech is typically prepared during which step of the debt or equity financing process?

Step 3: Developing a strategy for engaging potential investors or bankers

All of the following should be avoided when it comes to funding ventures through friends and family except:

Stipulating the terms of the loan with a set repayment schedule.

When it comes to funding ventures through friends and family, which of these would be the best to do?

Stipulating the terms of the loan with a set repayment schedule.

Raising money for a start-up is _______

a balancing act

It typically takes between​ ______ to develop an electronic game.

2 and 4 years

According to​ Fundable, ___ percent of​ start-ups are funded by friends and family.

38

The prototypical business angel is typically​ __ years old.

50

According to​ Fundable, _____ percent of​ start-ups are funded through the​ entrepreneur's personal savings and credit.

57

Which of the following is NOT an example of a bootstrapping​ method?

Buy new instead of used equipment

​_____ is the practice of funding a project or new venture by raising monetary contributions from a large number of​people, typically via the Internet.

Crowdfunding

Which of the following statements regarding how entrepreneurs go about the task of raising capital is most accurate?

Entrepreneurs lack experience in this area.

​______ financing means exchanging partial ownership of a​ firm, usually in the form of​ stock, for funding.

Equity

____________ is not one of the sources of equity funding.

Factoring

Which of the following is NOT a topic you should speak about in a​ 60-second elevator​ pitch?

How quickly you will be profitable.

​A(n) ______ is the first sale of stock by a firm to the public.

IPO

​____ is when the lender provides a business with a lump sum of money in exchange for a share of future sales.

Merchant cash advance

____________ is not one of the reasons most entrepreneurial ventures need to raise money during their early life.

Negative sweat equity

Which is a major advantage of obtaining a loan as opposed to equity funding?

None of the ownership of the firm is surrendered.

_____________ is not one of the reasons most entrepreneurial ventures need to raise money during their early life.

Rapid product development cycles

Which is not one of the sources of equity funding?

SBA guarantees

The most common sources of debt financing are commercial banks and​ _______.

Small Business Administration - guaranteed loans

The vast majority of founders contribute personal funds along with​ _______ to their ventures.

The vast majority of founders contribute personal funds along with​ _______ to their ventures.

Entrepreneurs need to have as full an understanding as possible of the alternatives that are available with regard to raising money. And raising money is​ _________.

a balancing act


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