Deck 8: Sources of Capital for Entrepreneurs

Question 1

Which of the following statements is not true of venture capitalists?

A)They want the entrepreneur and the management to run the company.
B)They expect high return on investments.
C)They are interested in trying to manage firms themselves.
D)They take a long time to raise venture capital.

Answer 1

C

Question 2

Private placement is a method of raising capital through the private placement of securities.

Answer 2

True

Question 3

Sophisticated investors are wealthy individuals who invest more or less regularly in new and/or early- and late-stage ventures.

Answer 3

True

Question 4

Venture capitalists,surprisingly,require little information before they make an investment.

Question 5

The main objective of Regulation D is to

A)increase investment in private placement.
B)regulate new small-business investment.
C)make it easier and less expensive for small ventures to sell stock.
D)reduce debt financing by small enterprises.

Question 6

Sources of debt financing include trade credit,accounts receivables,factoring,and finance companies.

Question 7

The most common source of debt financing is

A)trade credit.
B)factoring.
C)commercial banks.
D)finance companies.

Question 8

One of the advantages of public offerings is

A)liquidity.
B)disclosure.
C)requirements.
D)cost.

Question 9

A disadvantage of debt financing is

A)regular interest payments.
B)possible cash flow enhancement.
C)inhibition of growth and development due to equity investments.
D)relinquishment of ownership.

Question 10

Informal risk capitalists are often referred to as "business angels."

Question 11

Advantages of debt financing include all of the following except:

A)low interest rates that justify the opportunity cost.
B)regular interest payments.
C)potential greater return on equity.
D)no relinquishment of ownership.

Question 12

Regulation D augments the regulations for reports and statements required for selling stock to private parties,friends,employees,customers,relatives,local professionals.

Question 13

Because the advantages of going public outweigh the disadvantages,it is in a corporation's best interest to go public.

Question 14

Equity financing is money invested in the venture with legal obligations to repay the principal amount of interest or interest rate on it.

Question 15

Which of the following is not a type of debt financing?

A)private placement
B)trade credits
C)finance companies
D)accounts receivables

Question 16

Major trends in the venture capital field today include all of the following except

A)less specialized and more homogenous funds
B)emerging feeder funds
C)decrease in start-up investment amounts
D)global reach

Question 17

Which of the following terms is not synonymous with social lending?

A)crowdfunding
B)peer-to-peer (P2P) lending
C)banking 2.0
D)commercially viable lending

Question 18

Informal risk capitalists are those who have already made their money and now seek to help new ventures.

Question 19

Use of debt to finance a new venture involves a payback of funds plus an interest fee for the use of the money.

Question 20

Which of the following is a type of equity financing?

A)convertible debentures
B)common stock
C)loan with warrants
D)loan without warrants

Question 21

The entrepreneur should ask the venture capitalist _____ questions.

A)at most ten
B)exactly twenty
C)an unlimited number of
D)no

Question 22

Which of the following does not represent a category of angel investors?

A)micromanagement angels
B)entrepreneurial angels
C)amateur angels
D)corporate angels

Question 23

Are formal firms the only source of venture capital?

Question 24

What are the major types and uses of debt financing?

Question 25

An informal risk capitalist is referred to as:

A)your neighbor.
B)a business angel.
C)a retiree.
D)someone with extra money to invest but who is not interested becoming an entrepreneur.

Question 26

Which is an important question for the entrepreneur to ask when evaluating the venture capitalist?

A)Is the person someone with whom the entrepreneur can work?
B)Is the person a close relative?
C)Is the person wealthy?
D)Is the person a college graduate?

Question 27

How does a public offering differ from a private placement?

Question 28

Should entrepreneurs accept proposals from the first venture capitalist that offers?

Question 29

Which is one of the most important questions for entrepreneurs to ask regarding venture capitalists?

A)What is it like to work with their firm?
B)Are they good communicators?
C)Are they wealthy?
D)Are they good at financial computation?

Question 30

What is the potential future of crowdfunding sites to raise capital with respect to entrepreneurs?