MGMT 4252- Exam 3

Which type of risk-capital market is available as a funding source only for high-potential ventures?

Public equity market

Mortgage financing is another term for:

real-estate asset-based financing.

Business angels usually find their deals through:

referral sources.

Market development strategy

strategy to grow by selling the firms existing products to new groups of customers

Asset base for loans

tangible collateral values at more than the amount fo money borrowed

equity partnership

the sponsoring company and the limited partners form a new jointly owned corporation

Debt to equity

total liabilites/ stockholders equity Higher percent of debt the higher the risk to the creditors

Debt ratios

total liabilities/ total assets

Priciple of analysis

understanding how tiem is currently being allocated, and where it is being inefficiently invested

Royalty rates rang from ?

6-10 percent

Equity Financing

Obtaining funds for the company in exchange for ownership. Does not require collateral and offers the investor some form of ownership in the venture.

Venture capital markets

One of the risk capital markets consisting of formal firms

Least expensive fund in terms of cost and control? Few is any entrepreneurs use this

Personal funds

Additional fee in debt financing is called...

Points

Financial ratios

control mechanism to test the financial strength of the new venture

SBIR grant program

grants from the U.S. governmetn to small technology based businesses

Which funds are frequently employed...Internal or external

internal fund

The least liquid current asset, _____, is eliminated when calculating the acid test ratio.

inventory

horizantal integration

occurs at the same level of the value added chain but simply involves a different but complementary value added chain -a firm that manufactures washing machines might manufacture detergent '

public equity markets

one of the risk capital markets consisting of publicly owned stocks of companies

Diversification strategy

A strategy to grow by selling a new product to a new market

Business angels typically invest what amount in the businesses they finance?

$100,000 - $500,000

Acid ratio

(current assets-inventory) / liabilities 1:1 ratio is favorable

Activity Ratio

Accounts receivable/average daily sales 20 day payment required e=means customers pay on time

Private Investors are also known as ....?

Angels

________ financing does not require any collateral.

Equity

T/F Any patent rights on technology developed in SBIR grants are the property of the federal government

False

T/F Banks will lend a company up to 50% of their account receivable value.

False

T/F SBA guaranteed loans are guaranteed for 100 percent of the loan amount.

False

T/F Venture capitalists tend to avoid investment proposals that are referred from lawyers and accountants.

False

T/F Private venture capital firms use both state and federal grant money to invest in other businesses.

False

Principles of efectiveeness

Focus on the most important issue, even when under pressure

SBA (small business administration)

Guarantor of loans made by private and other institutions

Inventory tunrover

High turnover is favorable, venture is able to sell their inventory quickly Cost of goods sold/ inventory

Risk Capital MArkets

Markets providing debt and equity to nonsecure financing situations

Debt Financing (asset-based financing)

Method used to involving an interest bearing instrument, usually a loan, the payment of which is only indirectly related to the sales and profits venture. Sometimes requires that some asses (car, house, inventory, plant, machine) be used as collateral

Research & development limited partnership

Money given to a firm for developing a technology that involves a tax shelter

Under the ____________ program, federal agencies with budgets over $1 billion are required to set aside 0.3 percent for small businesses.

Small Business Technology Transfer

Which grant program requires partners at universities or other non-profit institutions?

Small Business Technology Transfer

SBIC firms

Small companies with some government money that invest in other companies

Basic 7a Loan Guaranty

The SBA's primary business loan program.

T/F If there is a significant disparity between the offering price of the shares and the price paid for shares by officers, directors, or founding stockholders, a dilution section is necessary in the prospectus.

True

T/F The SBA 7(a) loan program has a maximum loan amount of $5 million.

True

T/F When a bank grants a line of credit, a "commitment fee" is assessed at the start of the loan.

True

T/F With the enactment of the Sarbanes-Oxley Act in 2002, the expense and administrative responsibilities of being a public company, as well as the liability risks of officers and directors, are significantly greater.

True

Principle of desire

a recognition of the need to change personal attitudes and habits regarding the allocation of time

In ____ the entrepreneur sells equipment to the lender then arranges for its continued use.

a sale-leaseback arrangement

backward integration

a step back (up) in the value added chain toward the raw materials -firm becomes its own supplier

foward intergration

a step foward (down) on the value added chain toward the customers -firm becomes its own buyer

Product development strategies

a strategy to grow by developing and selling new products to people who are already purchasing the firms existing products

Penetration strategy

a strategy to grow by encouraging existing customers to buy more of the firms current products

Principle of teamwork

acknowledgment that only a small amount of time is actually under ones control and that most of ones time is take up by others

Informal risk capital market

area of risk captial markets consisting mainly of individulas