Question 1

Glenda is trying to decide between the use of debt and the use of equity to finance her young business.  She should remember that:

Accepted Answer

A)  her return on assets will be less if she uses debt financing. 
B)  using other people's money to finance one's business is seldom a good idea. 
C)  the lender will have partial control of the business. 
D)  debt must be repaid even if the company does not make a profit. 
A)  her return on assets will be less if she uses debt financing. 
B)  using other people's money to finance one's business is seldom a good idea. 
C)  the lender will have partial control of the business. 
D)  debt must be repaid even if the company does not make a profit. D

Question 2

Frankie is looking for sources of financing for his new tour company. At this time, he would like to keep his financing close to home but eventually apply for bank financing. What are Frankie's financial support options?

Accepted Answer

Frankie could use the following three sources. 
- First utilize personal savings. Since Frankie wants to apply for bank financing in the future, the bank will want to see his personal investment into his company before they lend any funds. 
- Borrow money from friends and family. This source is a quick and available source of revenue because lending is based more on personal relationships rather than financial analysis. 
- Open a credit card for business financing. Although this method is not the typically recommended option, it is available although interest costs may become overwhelming.

Question 3

When considering a loan application, bankers will consider:

Accepted Answer

A)  the credit score of the applicant. 
B)  the four Cs of credit 
C)  the five Cs of credit. 
D)  the applicant's character only. 
A)  the credit score of the applicant. 
B)  the four Cs of credit 
C)  the five Cs of credit. 
D)  the applicant's character only. C

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

In his presentation to his banker when he applies for a business loan to purchase additional equipment, Alan should emphasize:

Accepted Answer

A)  how much profit the new equipment will, generate. 
B)  how he will be able to repay the principal of the loan. 
C)  how energy-efficient the new equipment is. 
D)  how much income he will generate for the bank. 
A)  how much profit the new equipment will, generate. 
B)  how he will be able to repay the principal of the loan. 
C)  how energy-efficient the new equipment is. 
D)  how much income he will generate for the bank.

Question 6

Lines of credit are legal obligations to provide capital.

Accepted Answer

A) True 
 B)False

Question 7

Miracle Fund LLC is a venture capitalist. In exchange for providing venture capital, Miracle Fund:

Accepted Answer

A)  expects the entrepreneur to pay interest to the Fund. 
B)  receives the right to own a percentage of the entrepreneur's business. 
C)  takes a percentage of the annual earnings. 
D)  becomes a general partner of the entrepreneur. 
A)  expects the entrepreneur to pay interest to the Fund. 
B)  receives the right to own a percentage of the entrepreneur's business. 
C)  takes a percentage of the annual earnings. 
D)  becomes a general partner of the entrepreneur.

Question 8

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

Accepted Answer

A)  trade credit. 
B)  long-term bank loans. 
C)  mortgages. 
D)  asset-based notes. 
A)  trade credit. 
B)  long-term bank loans. 
C)  mortgages. 
D)  asset-based notes.

Question 9

Venture capital companies

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 10

Sandy is using a governmental program to help finance her new business. Her company is not eligible for a loan through a normal lending channel and is receiving $120,000 with the SBA guaranteeing 85 percent of the loan. She also had to submit a loan application to the lender. Ellie is participating in the

Accepted Answer

A)  7(a) Loan Guaranty Program. 
B)  Certified Development Company 504 Loan Program. 
C)  Small Business Innovative Research Program. 
D)  7(M) Microloan Program. 
A)  7(a) Loan Guaranty Program. 
B)  Certified Development Company 504 Loan Program. 
C)  Small Business Innovative Research Program. 
D)  7(M) Microloan Program.

Question 11

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 lumberyard 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 12

Use of debt financing increases potential returns when a company is performing well, but it also increases the possibility of lower--even negative--returns if the company does not attain its goals in a given year.

Accepted Answer

A) True 
 B)False

Question 13

Williams Alternative Power, Inc., a company developing solar panels, has done considerable research and limited production during its two year life.  It is about ready for its IPO.  At this stage of its life cycle, its ability to attract venture capital is:

Accepted Answer

A)  greater. 
B)  lessened. 
C)  optimal. 
D)  limited. 
A)  greater. 
B)  lessened. 
C)  optimal. 
D)  limited.

Question 14

Discuss business traits that business angels look for in prospective investments.  What are typical motivations?

Accepted Answer

Company traits typically include the fol

Question 15

Match between columns
                        Premises: Individuals who form limited partnerships for the purpose of raising venture capital from large institutional investors
An SBA program that provides short-term loans of up to $50,000 to small businesses and not-for-profit child-care centers
A loan program that helps small companies obtain financing through a guaranty provided by the SBA
An SBA program that helps to finance companies that plan to transform laboratory research into marketable products
Funds provided by wealthy private individuals to high-risk ventures
A lender that uses frunds from federal, state, and private sources to priovide financing to small businesses in low-income communities
An SBA loan program that provides long-term financing for small businesses to acquire real estate or machinery and equipment
Privately owned banks, regulated by the SBA, that provide long-term loans and/or equity capital to small businesses

Accepted Answer

The Answer of Loan covenants and 7(a) Loan Guaranty Program is...

Question 16

Instead of borrowing money from suppliers to purchase equipment, an increasing number of small businesses are

Accepted Answer

A)  obtaining trade credit instead. 
B)  making these purchases outright. 
C)  choosing to lease the equipment. 
D)  opting to streamline assembly processes to reduce expenditures. 
A)  obtaining trade credit instead. 
B)  making these purchases outright. 
C)  choosing to lease the equipment. 
D)  opting to streamline assembly processes to reduce expenditures.

Question 17

Match between columns
                        Premises: Bank-imposed restrictions on a borrower that enhance the chance of timely repayment
Obtaining cash from a lender who, for a fee, advances the amount of the borrower's cost of goods sold for a specific customer order
The sale of a firm's capital stock to select individuals
The interst rate charged by London banks on loans to other London banks
The issuance of stock to be traded in public financial markets
1/100th of 1 percent when quoting an interest rate
A long-term loan with real property held as collateral
An informal agreement between a borrower and a bank as to the maximum amount of funds the bank will provide an any one time
Private individuals who invest in others' entrepreneurial ventures
A very large payment required about halfway through the term over which payments were calculated, repaying the loan balance in full
A line of credit secured by working capital assets
Money loaned for a 5-to 10-year term, corresponding to the length of time the investment will bring in profits
The interest rate chareged by commercial banks on loans to their most creditworthy customers
A loan for which items of inventory or other movable property serve as collateral
The process of raising very small investments from a large number of investors via the Internet
Obtaining cash by selling accounts receivable to another firm
An installment loan from a seller of machinery used by a business

Accepted Answer

The Answer of Factoring and Balloon payment and LIBOR (London is...

Question 18

Around 5 percent of the business plans reviewed by venture capitalists are funded.

Accepted Answer

A) True 
 B)False

Question 19

The five C's of credit are character, capacity, capital, conditions, and collateral.

Accepted Answer

A) True 
 B)False

Question 20

In groups of business angels,

Accepted Answer

A)  all angels must agree to invest or the deal is off. 
B)  a majority of angels favoring investment obligates all angels to the deal. 
C)  individual angels make personal decisions about whether or not to invest. 
D)  no angel can invest unless all angels invest. 
A)  all angels must agree to invest or the deal is off. 
B)  a majority of angels favoring investment obligates all angels to the deal. 
C)  individual angels make personal decisions about whether or not to invest. 
D)  no angel can invest unless all angels invest.

Glenda is trying to decide between the use of debt and the use of equity to finance her young business. She should remember that:

Frankie is looking for sources of financing for his new tour company. At this time, he would like to keep his financing close to home but eventually apply for bank financing. What are Frankie's financial support options?

When considering a loan application, bankers will consider:

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

In his presentation to his banker when he applies for a business loan to purchase additional equipment, Alan should emphasize:

Lines of credit are legal obligations to provide capital.

Miracle Fund LLC is a venture capitalist. In exchange for providing venture capital, Miracle Fund:

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

Venture capital companies

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 lumberyard would be to use ________.

Use of debt financing increases potential returns when a company is performing well, but it also increases the possibility of lower--even negative--returns if the company does not attain its goals in a given year.

Williams Alternative Power, Inc., a company developing solar panels, has done considerable research and limited production during its two year life. It is about ready for its IPO. At this stage of its life cycle, its ability to attract venture capital is:

Discuss business traits that business angels look for in prospective investments. What are typical motivations?

Instead of borrowing money from suppliers to purchase equipment, an increasing number of small businesses are

Around 5 percent of the business plans reviewed by venture capitalists are funded.

The five C's of credit are character, capacity, capital, conditions, and collateral.

In groups of business angels,

The Entrepreneurial Life

Integrity Ethics and Social Entrepreneurship

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

The Location Plan

Understanding a Firm S 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 Business

Professional Management and the Small Business

Managing Human Resources

Managing Small Business Operations

Managing the Firm S Assets

Managing Risk

Filters

Exam 12: A Firm S Sources of Financing

Glenda is trying to decide between the use of debt and the use of equity to finance her young business. She should remember that:

Frankie is looking for sources of financing for his new tour company. At this time, he would like to keep his financing close to home but eventually apply for bank financing. What are Frankie's financial support options?

When considering a loan application, bankers will consider:

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

In his presentation to his banker when he applies for a business loan to purchase additional equipment, Alan should emphasize:

Lines of credit are legal obligations to provide capital.

Miracle Fund LLC is a venture capitalist. In exchange for providing venture capital, Miracle Fund:

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

Venture capital companies

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 lumberyard would be to use ________.

Use of debt financing increases potential returns when a company is performing well, but it also increases the possibility of lower--even negative--returns if the company does not attain its goals in a given year.

Williams Alternative Power, Inc., a company developing solar panels, has done considerable research and limited production during its two year life. It is about ready for its IPO. At this stage of its life cycle, its ability to attract venture capital is:

Discuss business traits that business angels look for in prospective investments. What are typical motivations?

Instead of borrowing money from suppliers to purchase equipment, an increasing number of small businesses are

Around 5 percent of the business plans reviewed by venture capitalists are funded.

The five C's of credit are character, capacity, capital, conditions, and collateral.

In groups of business angels,

The Entrepreneurial Life

Integrity Ethics and Social Entrepreneurship

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

The Location Plan

Understanding a Firm S 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 Business

Professional Management and the Small Business

Managing Human Resources

Managing Small Business Operations

Managing the Firm S Assets

Managing Risk

Filters