ENT 396 CH. 8

Which of the following is not a type of debt financing? a. trade credits b. accounts receivables c. private placement d. finance companies

private placement

Advantages of debt financing include all of the following except: a. low interest rates that justify the opportunity cost. b. regular interest payments. c. potential greater return on equity. d. no relinquishment of ownership.

regular interest payments.

The entrepreneur should ask the venture capitalist _____ questions. a. exactly twenty b. an unlimited number of c. no d. at most ten

an unlimited number of

The most common source of debt financing is a. factoring. b. commercial banks. c. trade credit. d. finance companies.

commercial banks.

Which of the following is a type of equity financing? a. loan with warrants b. common stock c. convertible debentures d. loan without warrants

common stock

The main objective of Regulation D is to a. reduce debt financing by small enterprises. b. make it easier and less expensive for small ventures to sell stock. c. increase investment in private placement. d. regulate new small-business investment.

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

A disadvantage of debt financing is a. relinquishment of ownership. b. inhibition of growth and development due to equity investments. c. regular interest payments. d. possible cash flow enhancement.

regular interest payments.

Major trends in the venture capital field today include all of the following except a. emerging feeder funds b. less specialized and more homogenous funds c. decrease in start-up investment amounts d. global reach

less specialized and more homogenous funds

One of the advantages of public offerings is a. requirements. b. cost. c. liquidity. d. disclosure.

liquidity.

An informal risk capitalist is referred to as: a. a business angel. b. your neighbor. c. someone with extra money to invest but who is not interested becoming an entrepreneur. d. a retiree.

a business angel.

Which is an important question for the entrepreneur to ask when evaluating the venture capitalist? a. Is the person a close relative? b. Is the person wealthy? c. Is the person someone with whom the entrepreneur can work? d. Is the person a college graduate?

Is the person someone with whom the entrepreneur can work?

Which of the following statements is not true of venture capitalists? a. They take a long time to raise venture capital. b. They are interested in trying to manage firms themselves. c. They expect high return on investments. d. They want the entrepreneur and the management to run the company.

They are interested in trying to manage firms themselves.

(T/F) Informal risk capitalists are often referred to as "business angels."

True

(T/F) Informal risk capitalists are those who have already made their money and now seek to help new ventures.

True

(T/F) Private placement is a method of raising capital through the private placement of securities.

True

(T/F) Sophisticated investors are wealthy individuals who invest more or less regularly in new and/or early- and late-stage ventures.

True

(T/F) Sources of debt financing include trade credit, accounts receivables, factoring, and finance companies.

True

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

True

Which is one of the most important questions for entrepreneurs to ask regarding venture capitalists? a. What is it like to work with their firm? b. Are they wealthy? c. Are they good communicators? d. Are they good at financial computation?

What is it like to work with their firm?

Which of the following does not represent a category of angel investors? a. corporate angels b. amateur angels c. micromanagement angels d. entrepreneurial angels

amateur angels

(T/F) Because the advantages of going public outweigh the disadvantages, it is in a corporation's best interest to go public.

False

(T/F) Equity financing is money invested in the venture with legal obligations to repay the principal amount of interest or interest rate on it.

False

(T/F) Regulation D augments the regulations for reports and statements required for selling stock to private parties, friends, employees, customers, relatives, local professionals.

False

(T/F) Venture capitalists, surprisingly, require little information before they make an investment.

False

Which of the following terms is not synonymous with social lending? a. peer-to-peer (P2P) lending b. commercially viable lending c. crowdfunding d. banking 2.0

commercially viable lending