AGRI 4369

8) Entrepreneurs basically "borrow from themselves" by pledging their ________ as collateral for the loans they receive in a ________. A) business; commercial loan B) business assets; home equity loan C) home; home equity loan D) big ticket items; floor loan

C) home; home equity loan

9) A ________ is an agreement with a bank that allows a small business to borrow up to a predetermined specified amount during the year without making an application each time. A) term loan B) factor C) line of credit D) floor plan

C) line of credit

7) Because of the risk/return tradeoff, small businesses that borrow money repay it with interest at the ________. A) prime interest rate B) prime interest rate minus a few percentage points C) prime interest rate plus a few percentage points D) lender's cost of capital

C) prime interest rate plus a few percentage points

2) The primary advantage of equity capital is ________. A) its lower interest rate B) that it is readily available to a large number of entrepreneurs from a variety of lenders C) that it does not have to be repaid like a loan does D) that it does not appear on a company's balance sheet

C) that it does not have to be repaid like a loan does

10) ________ is/are a method of financing frequently used by retailers of "big ticket items" such as autos. A) Discounted installment contracts B) Trade credit C) Installment loans D) Floor planning

D) Floor planning

3) The first place an entrepreneur should look for startup capital is ________. A) a bank B) a venture capitalist C) the Small Business Administration D) his own savings

D) his own savings

6) A(n) ________ is when a company raises capital by selling shares of its stock to the general public for the first time. A) venture capital offering B) partnership C) debt equity arrangement D) initial public offering

D) initial public offering

4) A method of raising capital that taps the power of social networking and allows entrepreneurs to post their elevator pitches and proposed investment terms on specialized Web sites and raise money from ordinary people who invest as little as $100 is called ________. A) crowd funding B) angel financing C) venture capital D) bootstrapping

A) crowd funding

5) Which of the following is not a characteristic of a typical angel investor? A) Investing money locally. B) Purchasing majority ownership in the company. C) Investing in the startup phase of the company. D) Willing to wait seven years or more to cash out an investment.

B) Purchasing majority ownership in the company

1) The primary disadvantage of equity capital is that the entrepreneur ________. A) must repay it at some point with interest B) must give up some (perhaps most) of the ownership in the business to outsiders C) experiences the disadvantage of the risk/return tradeoff in the form of higher interest rates D) B and C above

B) must give up some (perhaps most) of the ownership in the business to outsiders