EEE exam 2

Please order the legal entities from high (1 top) low cost and low protection to (5 bottom) high cost and high protection

sole proprietorship, limited partnership, limited liability company, S corporation, C corporation

According to the textbook, many entrepreneurs go about the task of raising capital haphazardly because they ________.

they lack experience in this area and because they don't know much about their choices

Lady Gaga is the founder of a company in the semiconductor industry. Her firm is still in the feasibility analysis stage and doesn't have a product that is ready to sell. The company is spending about $25,000 per month and expects to maintain that level of spending until it reaches profitability. The $25,000 a month is her ______ rate.

Burn

________ are individuals who invest their own personal capital directly in start-ups.

Business angels

Large firms like Apple, Facebook, General Electric, and Microsoft, that trade on organized stock exchanges, are_______.

C Corporations

For startup firms, the cost of buying real estate, building facilities, and purchasing equipment often exceeds the firm's ability to provide funds for those needs on its own. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example?

Capital investments

A business plan is important as it forces the founding team to systematically think through every aspect of their new venture and it _____

Communicates the merits of a new venture to outsiders, such as investors and banker

An important part of obtaining venture capital funding is going through_______, which refers to the process of investigating the merits of a potential venture and verifying the key claims made by the business plan.

Due diligence

Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on the ground while they are being loaded and unloaded, is the lowest in the airline industry. In terms of the primary financial objectives of a firm, this attribute is a measure of Southwest's________

Efficiency

The advantage of having a code of conduct is that it provides specific guidance to entrepreneurs, managers, and _______ regarding expectations of them in terms of ethical behavior

Employees

A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called a(n)________.

Ethical dilemma

Rosa Parks spoke to an investor who is interested in her business idea. Rosa offered to send the investor a copy of her full business plan, but the investor asked for a short overview of the business plan instead. What portion of her business plan should Rosa send the investor?

Executive summary

Historically, commercial banks have been viewed as an excellent source of financing for startup firms.

False

______ are an estimate of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans.

Forecasts

A(n) _________ is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founder will have to remain with the firm for their shares to fully vest

Founders agreement

Which of the following statements is not true regarding the attributes of the founders of a firm?

Founders with experience in the same industry as their new venture will typically have "blinders" on and are typically not as effective as founders new to the industry

Which of the following business plans matches with its appropriate length?

Full business plan - 25-35 pages

Which of the following is NOT a source of equity funding?

Government Grants

_______ financial statements reflect past performances and are usually prepared on a quarterly and annual basis.

Historical

Which of the following statements is incorrect regarding boards of directors?

If new venture organizes as a corporation, it is not legally required to have a board of directors, but it is strongly recommended

Which of the following is a disadvantage of a C corporation

Income is subject to double taxation

The first sale of stock by a firm to the public is referred to as a(n) _______.

Initial public offering

Peggy Sue owns a store that sells exercise equipment. Each January 1, she makes a very accurate account of all her merchandise and products waiting to be sold that are in her store's __________.

Inventory

Answer Q1-Q5 Q1. Required Capital Return (Investment *ROI) Q2. Company Value Year 5 (Profit * P/E) Q3. % Equity Required at Exit (Req Return/ Value %) Q4. Post Money Valuation (Investment/ % Equity) Q5. Pre Money Valuation (Post- Investment)

Know how to solve (look at powerpoint)

The car company has growing revenue but not profits. Can you identify what is causing the problem?

Know how to solve (look at powerpoint)

Which of the following is the most important thing that an entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization?

Lead by example

Gene Simmons owns a specialized computer software company. Although Gene's software designers and programmers are very good. It takes 2-3 years to develop a good software product. This example illustrates the need for funding or financing referred to as_________.

Lengthy product development

_______ is a company's ability to meet its short-term financial obligations.

Liquidity

Is the process in which an impartial third party helps those involved in a dispute reach an agreement

Mediation

A firm's profit margin, or return on sales, is computed by dividing_______.

Net income by net sales

Sam Cooke, a new entrepreneur who had just launched his venture, joined an entrepreneurship boot camp. Sam's goal in joining the boot camp was to overcome the liability of________.

Newness

A(n) ______ agreement binds an employee or another party to not disclose a company's trade secret. A _____ agreement prevents an individual from competing against a former employee for a specific period of time.

Nondisclosure; noncompete

James McMurtry has decided to write a business plan that is intended to be read primarily by his employees, which will present a blueprint for his company's entire operation and will provide guidance to operational managers. James should write a(n) ___________ business plan.

Operational

The four main financial objectives of a firm are________.

Profitability, liquidity, efficiency, and stability

Financial management deals with two things - managing a company's finances and _____

Raising money

The strength and vigor of a firm's overall financial posture is referred to as___________.

Stability

Hillary Clinton is in the very early process of putting together a business startup, and is thinking about writing a plan to request funds to conduct a feasibility analysis and to write a more complete business plan. What type of business plan should Sarah write at this point?

Summary business plan

Which of the following was NOT identified in the textbook as an element of a new venture team?

Suppliers and Vendors

Kate Moss's startup, which is in the organic fruit and vegetables industry, was launched on January 1, 2015. However, prior to its formal launch, Kate spent many hours working on her business particularly during the feasibility analysis stage. The time and effort that entrepreneurs put into their venture, that can't easily be measured from a financial point of view, is referred to as ________ equity.

Sweat

Which of the following statements is incorrect about business plans?

The business plan should be written while the feasibility analysis is being completed

Which of the following is NOT a recommended guideline for writing a business plan?

To make the best impression, a business plan should follow an unconventional structure and stand out in some dramatic way

Factoring is a financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for cash.

True

A financial statement is a(n)_________.

Written report that quantitatively describes a firm's financial health

Equity investors typically have a _______ year investment horizon

4-9

The primary audiences for a business plan are_____

A firm's employees, current and potential investors, and other external stakeholders

Money owed to a company by its customers is referred to as _______.

Accounts receivable

Sue recently launched a social network for chefs. One thing Sue is thinking about creating is thinking about creating a panel of experts who can provide her ongoing direction and advice regarding the future of her business. Sue is thinking about creating a(n) __________

Advisory board

______ are itemized forecasts of a company's income, expenses, and capital needs are also an important tool for financial planning and control.

Budgets

Amy Grant just opened a soup and salad restaurant near Golden Gate Park in San Francisco, CA. Rather than borrow money or raise funds from investors. Amy started with her own money and then used her creativity and ingenuity and figured out how to get her business up and running without the need for external funding. Amy is utilizing a technique referred to as ________

Bootstrapping