Chapter 15 - Small Business Finance: Using Equity, Debt, & Gifts

interest

A charge for the use of money, usually figured as a percentage of the principal is called _____.

corporation

A legal "artificial" entity that is formed by filing specific documents with a state government is called a _____.

small business investment companies

Private businesses that are authorized to make SBA insured loans to start-ups and small businesses are called _____.

the owners themselves

The number one source of financing for small businesses is from _____.

the expected average future cost of funds.

The weighted average cost (WAC) refers to:

They publish RFPs that specify the conditions of a grant.

Which of the following is true of government agencies that issue grants?

None of the owners, except the general partner, is fully liable.

Which of the following is true of limited partnerships?

By providing capital funds for additional business opportunities

Which of the following ways does borrowing help increase potential profits?

Financial leverage

_____ is a measure of the amount of debt relative to total investment.

Tax abatement

_____ is provided by state and local governments, primarily to encourage specific activities that are expected to improve the blighted areas or provide additional employment.

Liquidity

_____ ratios measure the business's ability to pay debts and expenses that are due in the current accounting period.

Piggybacking

_____ refers to family or friends letting you add your purchases with theirs in order to get lower prices.

diversification

Investing in multiple investments of differing risk profiles for the purpose of reducing overall investment risk is called _____.

bootstrapping

Orion Inc. was started as a small organization with five employees. After the first year's profits were made, the owners decided to invest the profits in expanding the business. This is an example of financing the business using _____.

risk

The level of probability that an investment will not produce expected gain is called _____.

return on equity

The ratio of profits to owner investment in a business is referred to as _____.

SBIR and STTR.

The two largest governmental grant programs that are specifically intended for small business are:

If the ratio is greater, it indicates increased business risk.

Which of the following is true of the debt-to-equity ratio?

Building owner's wealth

After being in business for 24 months, Paul's auto spare parts company Chromson Inc. grows to a relatively stable size. Which of the following would be Paul's primary financial management need at this stage?

gift

Any valuable asset that is donated to a business without any obligation to repay or to give any ownership interest is called a(n) _____.