Exam 12: A Firms Sources of Financing

Based on an operating income of $30,000 and total assets of $200,000 what would be the percent return on assets?

Small business investment companies (SBICs)

Research for developing a new method of manufacturing would be a(n) _____ asset.

The financing source which has the greatest advantage of speed is

The traditional way to locate business angels is through

Equity investors cannot demand more than

If an owner is looking to take out a loan for equipment that will last approximately 8 years the ideal loan would be

Compared to firms that provide a good lifestyle for the owner but little in the way of attractive returns, a firm with potential for high growth and large profits has _____ possible sources of financing.

The federal government provides funds to small businesses through

Generally, as long as a firm's operating income return on its assets in greater than the cost of debt, the owners' return on equity investment will decrease as the firm uses more debt.

Asset-based lending is a type of financing secured by assets such as receivables, inventory, or both.

One potential problem with acquiring funds from friends and relatives is that they might feel that they have the right to interfere in the management of the business.

A _____ mortgage would likely be used to secure financing for mobile construction office.

You Make the Call-Situation 2 Carter Dalton is well on his way to starting a new venture-Max, Inc. He has projected a need for $350,000 in initial capital. He plans to invest $150,000 himself and either borrow the additional $200,000 or find a partner who will buy stock in the company. If Dalton borrows the money, the interest rate will be 6 percent. If, on the other hand, another equity investor is found, he expects to have to give up 60 percent of the company's stock. Dalton has forecasted earnings of about 16 percent in operating income on the firm's total assets.

Qualified small businesses that cannot obtain business loans through normal lending channels can get loans directly from the SBA through its 7(a) Loan Guaranty Program.

The age of a company has little impact on the types of financing available to it.

Commercial investors are sometimes called business angels.

Borrowing allows owners to retain voting control of the company.

The assets most commonly used for security by asset-based lending companies are

Venture capital companies