Exam 12: A Firms Sources of Financing

Borrowing money rather than issuing common stock typically increases the potential for higher rates of return to owners.

Match the definition with its term. -Privately owned banks, regulated by the SBA, that provide long-term loans and/or equity capital to small businesses

Commercial investors are sometimes called business angels.

The federal government primarily provides funds to small businesses through

Lyman's business has grown to 400 employees with annual revenues of $15 million. He would like to expand further but needs another $5 million. He should consider

A small business that needs to purchase real estate could apply for a 7(a) guaranty loan.

Match the definition with its term. -An SBA loan program that provides long-term financing for small businesses to acquire real estate or machinery and equipment

Assets such as the quality of a firm's employees are considered tangible in nature and thus have substantial value as collateral.

A loan covenant is very likely to require

Lines of credit are legal obligations to provide capital.

The private sale of a firm's common stock is regulated by the Securities and Exchange Commission.

A source of short-term funds for many small companies with inventories is

Small business owners sometimes accept higher levels of debt because doing so permits them to retain all of the stock and full ownership.

Private placement is the selling of stock to select venture capitalists.

Martina wants to expand her business. She will need to buy a larger facility and equip it with additional machinery. She should look into the SBA loan program that provides long-term financing for small businesses to acquire real estate or machinery and equipment called the

If a company has a signed purchase order from a creditworthy customer and the gross profit margin on the order is anticipated to be 36 percent, purchase-order financing is likely.

Janice loves to cook and go backpacking, and she had an idea for a backpacking cookbook that would combine ultralight ingredients into interesting and appetizing meals. However, she needs the money to research and test the recipes as well as cover printing and marketing expenses. How could Janice use the different crowdfunding options-donations, rewards, pre-purchase, or equity investing-to finance her cookbook?

Aileen Lee is ranked among the world's top venture capitalists, but when she invests in a company, she cannot demand more than

Will has decided to invest $10,000 into his neighbor's new company. The money will be used in the early stages of development. Will is considered a