Question 1

The primary advantage of equity capital is:

Accepted Answer

A)  its lower interest rate. 
B)  that it is readily available to a large number of entrepreneurs from a variety of lenders. 
C)  that it does not have to be repaid like a loan does. 
D)  that it does not appear on a company's balance sheet. 
A)  its lower interest rate. 
B)  that it is readily available to a large number of entrepreneurs from a variety of lenders. 
C)  that it does not have to be repaid like a loan does. 
D)  that it does not appear on a company's balance sheet.

Question 2

When searching for capital to launch their companies, entrepreneurs should remember several "secrets" to successful financing. Which of the following is not one of those secrets?

Accepted Answer

A)  Choosing the right sources of capital can be just as important as choosing the right form of ownership or the right location. 
B)  The money is out there, but the key is knowing where to look. 
C)  Creativity counts when searching for financing. 
D)  Raising money should not take very long; therefore, if it does not come quickly, it probably will not come at all. 
A)  Choosing the right sources of capital can be just as important as choosing the right form of ownership or the right location. 
B)  The money is out there, but the key is knowing where to look. 
C)  Creativity counts when searching for financing. 
D)  Raising money should not take very long; therefore, if it does not come quickly, it probably will not come at all.

Question 3

Unlike equity financing, debt financing does not require an entrepreneur to dilute her ownership interest in the company.

Accepted Answer

A) True 
 B)False

Question 4

The majority of the loans a commercial finance company makes are unsecured by collateral.

Accepted Answer

A) True 
 B)False

Question 5

Commercial banks are primarily lenders of short-term capital to small businesses, although they will make certain intermediate and long-term loans, normally requiring the loan to be secured by collateral.

Accepted Answer

A) True 
 B)False

Question 6

Leasing is not an effective method to reduce the long-term capital requirements.

Accepted Answer

A) True 
 B)False

Question 7

The ________ awards cash grants or long-term contracts to small companies that want to initiate or to expand their research and development efforts and give the opportunity to attract early-stage capital investments without having to give up significant equity or take on burdensome levels of debt.

Accepted Answer

A)  SBIR 
B)  SBA 
C)  RBS 
D)  STTR 
A)  SBIR 
B)  SBA 
C)  RBS 
D)  STTR

Question 8

A public stock sale is an effective method of raising large amounts of capital, but it can be an expensive and time-consuming process filled with regulatory nightmares.

Accepted Answer

A) True 
 B)False

Question 9

The most common form of secured credit is accounts receivable financing in which businesses can usually borrow an amount equal to 55-80 percent of its receivables.

Accepted Answer

A) True 
 B)False

Question 10

Lending practices at credit unions are very much like those at banks, but credit unions usually are willing to make smaller loans and will loan only to their members.

Accepted Answer

A) True 
 B)False

Question 11

The document outlining the details of the agreement between the entrepreneur and the stock underwriter is called:

Accepted Answer

A)  Regulation D. 
B)  a "blue sky" agreement. 
C)  the letter of intent. 
D)  the registration statement. 
A)  Regulation D. 
B)  a "blue sky" agreement. 
C)  the letter of intent. 
D)  the registration statement.

Question 12

The loans from commercial finance companies to small businesses:

Accepted Answer

A)  tend to be for smaller amounts than those from commercial banks, and at lower interest rates. 
B)  are based on the strength of the small companies' earning power. 
C)  tend to be at lower interest rates than those from commercial banks and are much harder to qualify for. 
D)  are often similar to the types of loans commercial banks offer, but commercial finance loans usually carry higher interest rates. 
A)  tend to be for smaller amounts than those from commercial banks, and at lower interest rates. 
B)  are based on the strength of the small companies' earning power. 
C)  tend to be at lower interest rates than those from commercial banks and are much harder to qualify for. 
D)  are often similar to the types of loans commercial banks offer, but commercial finance loans usually carry higher interest rates.

Question 13

In a Rule 147 (intrastate) offering, a company may only sell its shares to investors in the state in which it is incorporated and does business.

Accepted Answer

A) True 
 B)False

Question 14

Venture capital companies reject 90 percent of the proposals they receive because they don't meet the firms' investment criteria.

Accepted Answer

A) True 
 B)False

Question 15

Asset-based borrowing permits small businesses:

Accepted Answer

A)  to borrow up to 100 percent of the value of their inventory or their accounts receivable for the money they need for long-term goals. 
B)  to use normally unproductive assets such as accounts receivable and inventory. 
C)  to obtain loans more easily but with less borrowing power than using unsecured lines of credit. 
D)  access to a source of funds ideally suited for long-term financing needs. 
A)  to borrow up to 100 percent of the value of their inventory or their accounts receivable for the money they need for long-term goals. 
B)  to use normally unproductive assets such as accounts receivable and inventory. 
C)  to obtain loans more easily but with less borrowing power than using unsecured lines of credit. 
D)  access to a source of funds ideally suited for long-term financing needs.

Question 16

The formal underwriting agreement between the company and the underwriter is signed:

Accepted Answer

A)  on the last day before the registration statement becomes effective. 
B)  when the statement of registration is filed. 
C)  during the road show. 
D)  at the time of the letter of intent. 
A)  on the last day before the registration statement becomes effective. 
B)  when the statement of registration is filed. 
C)  during the road show. 
D)  at the time of the letter of intent.

Question 17

The Kauffman Foundation reports that the average amount of capital that entrepreneurs use to start small businesses in the U.S. is nearly:

Accepted Answer

A)  $25,000. 
B)  $50,000. 
C)  $80,000. 
D)  $100,000. 
A)  $25,000. 
B)  $50,000. 
C)  $80,000. 
D)  $100,000.

Question 18

Explain the role that commercial banks play in financing small businesses. What kinds of loans do banks offer small companies?

Accepted Answer

Commercial banks provide the greatest nu

Question 19

In discounted accounts receivable financing, a small business can typically borrow an amount equal to ________ percent of its receivables it pledges as collateral.

Accepted Answer

A)  10 - 25 
B)  35 - 55 
C)  55 - 85 
D)  80 - 95 
A)  10 - 25 
B)  35 - 55 
C)  55 - 85 
D)  80 - 95

Question 20

A small company needs fixed capital to purchase its permanent assets.

Accepted Answer

A) True 
 B)False

The primary advantage of equity capital is:

When searching for capital to launch their companies, entrepreneurs should remember several "secrets" to successful financing. Which of the following is not one of those secrets?

Unlike equity financing, debt financing does not require an entrepreneur to dilute her ownership interest in the company.

The majority of the loans a commercial finance company makes are unsecured by collateral.

Commercial banks are primarily lenders of short-term capital to small businesses, although they will make certain intermediate and long-term loans, normally requiring the loan to be secured by collateral.

Leasing is not an effective method to reduce the long-term capital requirements.

The ________ awards cash grants or long-term contracts to small companies that want to initiate or to expand their research and development efforts and give the opportunity to attract early-stage capital investments without having to give up significant equity or take on burdensome levels of debt.

A public stock sale is an effective method of raising large amounts of capital, but it can be an expensive and time-consuming process filled with regulatory nightmares.

The most common form of secured credit is accounts receivable financing in which businesses can usually borrow an amount equal to 55-80 percent of its receivables.

Lending practices at credit unions are very much like those at banks, but credit unions usually are willing to make smaller loans and will loan only to their members.

The document outlining the details of the agreement between the entrepreneur and the stock underwriter is called:

The loans from commercial finance companies to small businesses:

In a Rule 147 (intrastate) offering, a company may only sell its shares to investors in the state in which it is incorporated and does business.

Venture capital companies reject 90 percent of the proposals they receive because they don't meet the firms' investment criteria.

Asset-based borrowing permits small businesses:

The formal underwriting agreement between the company and the underwriter is signed:

The Kauffman Foundation reports that the average amount of capital that entrepreneurs use to start small businesses in the U.S. is nearly:

Explain the role that commercial banks play in financing small businesses. What kinds of loans do banks offer small companies?

In discounted accounts receivable financing, a small business can typically borrow an amount equal to ________ percent of its receivables it pledges as collateral.

A small company needs fixed capital to purchase its permanent assets.

The Foundations of Entrepreneurship

Inside the Entrepreneurial Mind: From Ideas to Reality

Designing a Competitive Business Model and Building a Solid Strategic Plan

Conducting a Feasibility Analysis and Crafting a Winning Business Plan

Forms of Business Ownership

Franchising and the Entrepreneur

Buying an Existing Business

Building a Powerful Marketing Plan

E-Commerce and the Entrepreneur

Pricing Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Choosing the Right Location and Layout

Global Opportunities

Building a Team and Management Succession

Filters

Exam 13: Sources of Financing: Debt and Equity

The primary advantage of equity capital is:

When searching for capital to launch their companies, entrepreneurs should remember several "secrets" to successful financing. Which of the following is not one of those secrets?

Unlike equity financing, debt financing does not require an entrepreneur to dilute her ownership interest in the company.

The majority of the loans a commercial finance company makes are unsecured by collateral.

Commercial banks are primarily lenders of short-term capital to small businesses, although they will make certain intermediate and long-term loans, normally requiring the loan to be secured by collateral.

Leasing is not an effective method to reduce the long-term capital requirements.

The ________ awards cash grants or long-term contracts to small companies that want to initiate or to expand their research and development efforts and give the opportunity to attract early-stage capital investments without having to give up significant equity or take on burdensome levels of debt.

A public stock sale is an effective method of raising large amounts of capital, but it can be an expensive and time-consuming process filled with regulatory nightmares.

The most common form of secured credit is accounts receivable financing in which businesses can usually borrow an amount equal to 55-80 percent of its receivables.

Lending practices at credit unions are very much like those at banks, but credit unions usually are willing to make smaller loans and will loan only to their members.

The document outlining the details of the agreement between the entrepreneur and the stock underwriter is called:

The loans from commercial finance companies to small businesses:

In a Rule 147 (intrastate) offering, a company may only sell its shares to investors in the state in which it is incorporated and does business.

Venture capital companies reject 90 percent of the proposals they receive because they don't meet the firms' investment criteria.

Asset-based borrowing permits small businesses:

The formal underwriting agreement between the company and the underwriter is signed:

The Kauffman Foundation reports that the average amount of capital that entrepreneurs use to start small businesses in the U.S. is nearly:

Explain the role that commercial banks play in financing small businesses. What kinds of loans do banks offer small companies?

In discounted accounts receivable financing, a small business can typically borrow an amount equal to ________ percent of its receivables it pledges as collateral.

A small company needs fixed capital to purchase its permanent assets.

The Foundations of Entrepreneurship

Inside the Entrepreneurial Mind: From Ideas to Reality

Designing a Competitive Business Model and Building a Solid Strategic Plan

Conducting a Feasibility Analysis and Crafting a Winning Business Plan

Forms of Business Ownership

Franchising and the Entrepreneur

Buying an Existing Business

Building a Powerful Marketing Plan

E-Commerce and the Entrepreneur

Pricing Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Choosing the Right Location and Layout

Global Opportunities

Building a Team and Management Succession

Filters