Question 1

Small firms frequently run into problems when they

Accepted Answer

A)  offer equipment as collateral for a term loan. 
B)  underutilize the equipment purchased with the loan. 
C)  overestimate the cash inflows from the equipment purchased with the loan. 
D)  fail to match a term loan's payment terms with the expected cash inflows from the equipment purchased with the loan. 
A)  offer equipment as collateral for a term loan. 
B)  underutilize the equipment purchased with the loan. 
C)  overestimate the cash inflows from the equipment purchased with the loan. 
D)  fail to match a term loan's payment terms with the expected cash inflows from the equipment purchased with the loan.

Question 2

For every firm, there is a "right" answer to the question of balancing debt and equity, and it is important that the small business owner find that balance.

Accepted Answer

A) True 
 B)False

Question 3

State and local governments are becoming less involved in financing new businesses.

Accepted Answer

A) True 
 B)False

Question 4

Cameron has applied for a loan to expand his young business. When bankers look for evidence of whether he will be able to repay a loan, they usually base their assessment on

Accepted Answer

A)  what Cameron's firm has done in the past. 
B)  what Cameron says the firm will do in the future. 
C)  the opinion of investment analysts. 
D)  the business plan of the enterprise. 
A)  what Cameron's firm has done in the past. 
B)  what Cameron says the firm will do in the future. 
C)  the opinion of investment analysts. 
D)  the business plan of the enterprise.

Question 5

A firm with potential for large profits, as opposed to high growth potential, has many more possible sources of financing than does a firm that offers only unattractive returns.

Accepted Answer

A) True 
 B)False

Question 6

A company that has more than 100 employees with locations in several states is typically the type of company in which business angels make an investment.

Accepted Answer

A) True 
 B)False

Question 7

Williams Alternative Power, Inc. a company developing solar panels, is applying for a loan. The research the company has done for the manufacturing process would be a(n) _____ asset for the loan evaluation.

Accepted Answer

A)  collateral 
B)  intangible 
C)  revolving 
D)  tangible 
A)  collateral 
B)  intangible 
C)  revolving 
D)  tangible

Question 8

Ralph owns a lumber yard and has a $500,000 purchase order from a construction company. His cost of goods sold for this order is $300,000. Because his company needs working capital, the most logical loan for the lumber yard would be to use

Accepted Answer

A)  an equipment-based loan. 
B)  factoring. 
C)  purchase-order financing. 
D)  asset-based financing. 
A)  an equipment-based loan. 
B)  factoring. 
C)  purchase-order financing. 
D)  asset-based financing.

Question 9

A source of early-stage capital financing for a company is financing from commercial banks.

Accepted Answer

A) True 
 B)False

Question 10

Business angels provide what percentage of all outside equity capital?

Accepted Answer

A)  10 percent 
B)  50 percent 
C)  90 percent 
D)  Business angels only provide loans, not equity. 
A)  10 percent 
B)  50 percent 
C)  90 percent 
D)  Business angels only provide loans, not equity.

Question 11

When a stock sale is restricted to private placement, an entrepreneur can avoid many of the demanding requirements of the securities laws.

Accepted Answer

A) True 
 B)False

Question 12

Match the term with its definition.
-The process of raising small amounts of money from a large number of investors via the Internet

Accepted Answer

A) balloon payment 
B) business angels 
C) chattel mortgage 
D) crowdfunding 
E) factoring
F)initial public offering (IPO)
G)private placement
H)real estate mortgage 
A) balloon payment 
B) business angels 
C) chattel mortgage 
D) crowdfunding 
E) factoring
F)initial public offering (IPO)
G)private placement
H)real estate mortgage

Question 13

Venture capital firms

Accepted Answer

A)  are often limited partnerships that raise capital from other investors. 
B)  provide for the financing needs of large companies only. 
C)  are corporations or partnerships that operate as liquidation groups. 
D)  no longer operate in the U.S. market. 
A)  are often limited partnerships that raise capital from other investors. 
B)  provide for the financing needs of large companies only. 
C)  are corporations or partnerships that operate as liquidation groups. 
D)  no longer operate in the U.S. market.

Question 14

Match the term with its definition.
-1/100th of 1 percent when quoting an interest rate

Accepted Answer

A) asset-based loan 
B) basis point 
C) equipment loan 
D) LIBOR (London InterBank Offered Rate) 
E) line of credit
F)prime rate (base rate)
G)purchase-order financing
H)term loan 
A) asset-based loan 
B) basis point 
C) equipment loan 
D) LIBOR (London InterBank Offered Rate) 
E) line of credit
F)prime rate (base rate)
G)purchase-order financing
H)term loan

Question 15

Match the term with its definition.
-A long-term loan with real property held as collateral

Accepted Answer

A) balloon payment 
B) business angels 
C) chattel mortgage 
D) crowdfunding 
E) factoring
F)initial public offering (IPO)
G)private placement
H)real estate mortgage 
A) balloon payment 
B) business angels 
C) chattel mortgage 
D) crowdfunding 
E) factoring
F)initial public offering (IPO)
G)private placement
H)real estate mortgage

Question 16

Business angels, as opposed to venture capitalists, provide

Accepted Answer

A)  asset-based loans. 
B)  factoring. 
C)  informal venture capital. 
D)  trade credit. 
A)  asset-based loans. 
B)  factoring. 
C)  informal venture capital. 
D)  trade credit.

Question 17

A drawback to "going public" is

Accepted Answer

A)  large profit potential resulting in increased taxation. 
B)  numerous SEC requirements. 
C)  national recognition causing increased exposure. 
D)  additional working capital. 
A)  large profit potential resulting in increased taxation. 
B)  numerous SEC requirements. 
C)  national recognition causing increased exposure. 
D)  additional working capital.

Question 18

Many venture capitalists

Accepted Answer

A)  prefer common stock in exchange for their investment. 
B)  manage the liquidation of failed ventures. 
C)  intend to cash out after five to seven years. 
D)  insist on voting rights during stockholder meetings. 
A)  prefer common stock in exchange for their investment. 
B)  manage the liquidation of failed ventures. 
C)  intend to cash out after five to seven years. 
D)  insist on voting rights during stockholder meetings.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Amir left a large company to start his own firm. Which of the following is he more likely to rely on for financing in the early stages?

Accepted Answer

A)  Bank loan 
B)  IPO 
C)  Retirement savings 
D)  Bond sales 
A)  Bank loan 
B)  IPO 
C)  Retirement savings 
D)  Bond sales

Exam 12: A Firms Sources of Financing

Small firms frequently run into problems when they

For every firm, there is a "right" answer to the question of balancing debt and equity, and it is important that the small business owner find that balance.

State and local governments are becoming less involved in financing new businesses.

Cameron has applied for a loan to expand his young business. When bankers look for evidence of whether he will be able to repay a loan, they usually base their assessment on

A firm with potential for large profits, as opposed to high growth potential, has many more possible sources of financing than does a firm that offers only unattractive returns.

A company that has more than 100 employees with locations in several states is typically the type of company in which business angels make an investment.

Williams Alternative Power, Inc. a company developing solar panels, is applying for a loan. The research the company has done for the manufacturing process would be a(n) _____ asset for the loan evaluation.

Ralph owns a lumber yard and has a $500,000 purchase order from a construction company. His cost of goods sold for this order is $300,000. Because his company needs working capital, the most logical loan for the lumber yard would be to use

A source of early-stage capital financing for a company is financing from commercial banks.

Business angels provide what percentage of all outside equity capital?

When a stock sale is restricted to private placement, an entrepreneur can avoid many of the demanding requirements of the securities laws.

Match the term with its definition. -The process of raising small amounts of money from a large number of investors via the Internet

Venture capital firms

Match the term with its definition. -1/100th of 1 percent when quoting an interest rate

Match the term with its definition. -A long-term loan with real property held as collateral

Business angels, as opposed to venture capitalists, provide

A drawback to "going public" is

Many venture capitalists

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

Amir left a large company to start his own firm. Which of the following is he more likely to rely on for financing in the early stages?

The Entrepreneurial Lifethe Entrepreneurial Life

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Starting a Small Business

Franchises and Buyouts

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Organizational Plan: Teams, Legal Structures, Alliances, and Directors

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Understanding a Firms Financial Statements

Forecasting Financial Requirements

Planning for the Harvest

Building Customer Relationships

Product Development and Supply Chain Management

Pricing and Credit Decisions

Promotional Planning

Global Opportunities for Small Businesses

Professional Management and the Small Business

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Managing the Firms Assets

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