Deck 7: Market Feasibility Study

Question 1

Debt financing is when a firm raises money by selling all of the following,except:

A)Bonds
B)Bills
C)Notes
D)Shares

Answer 1

D

Question 2

Equity investors expect to receive:

A)Monthly interest payments
B)The principal amount of their investment returned on maturity of the loan
C)A return on their investment in the form of dividends and the increased future value of the business
D)A loan guarantee by the government

Answer 2

C

Question 3

An operating loan is useful for all of the following,except:

A)To cover your day-to-day expenses
B)To purchase additional inventory in anticipation of your peak selling period
C)To bridge unexpected cash flow interruptions and/or shortfalls
D)For long-term,costly capital expenditures

Answer 3

D

Question 4

In which of the following exit strategies might the investor's shares be repurchased by the company (sometimes in the form of a put option or a retraction clause)?

A)Buyback agreement
B)Sale of the investor's interest to a third-party investor
C)Acquisition by a third party
D)Management or employee buyout

Question 5

Which of the following sources of financing is used the least by entrepreneurs?

A)Commercial credit cards
B)Leasing
C)Government loans and grants
D)Trade credit

Question 6

The "price" you have to pay to borrow money is referred to as:

A)Capital cost
B)The interest rate
C)The consumption cost
D)The coupon rate

Question 7

______ is the cash and other liquid assets you personally have or are prepared to invest in the business.

A)Character
B)Capital
C)Collateral
D)Capacity

Question 8

Debt financing involves the sale of _____,while equity financing involves the sale of _______.

A)Shares; stock
B)Stock; bonds
C)Bonds; stock
D)Accounts; bonds

Question 9

Under the Canada Small Business Financing Act,new and existing businesses with gross revenues _______ may be eligible to obtain term loans from chartered banks and have the loan partially guaranteed by the federal government.

A)Of less than $1 million
B)Of less than $5 million
C)In excess of $1 million
D)In excess of $5 million

Question 10

Which industries are increasingly using crowdfunding to raise funds?

A)Textiles
B)Technology and media
C)Transportation
D)Telephone

Question 11

The ______ of the loan is the total amount of money you have been loaned.

A)Obligations
B)Principal
C)Summation
D)Capital cost

Question 12

In which of the following exit strategies is there an outright sale of the company in which the investor's shares would be sold as part of the sale of the company to a third-party?

A)Buyback agreement
B)Sale of the investor's interest to a third-party investor
C)Acquisition by a third party
D)Management or employee buyout

Question 13

The rate of interest that banks charge their "best customers" is called:

A)The bank rate
B)The prime rate
C)The discount rate
D)The coupon rate

Question 14

?????______ is when a business raises money by selling stock to investors.

A)Debt financing
B)Equity financing
C)Share financing
D)Stock financing

Question 15

Debt financing:

A)Does not have to be repaid
B)Allows investors to control the direction of the business
C)Requires servicing in the form of periodic interest payments
D)Is generally provided by government institutions

Question 16

The average minimum investment of a typical "venture capitalist" is:

A)$50,000
B)$100,000
C)$250,000
D)$500,000

Question 17

Which of the following sources of financing is used most frequently by entrepreneurs?

A)Commercial credit cards
B)Leasing
C)Personal savings
D)Trade credit

Question 18

______ is a secondary source for repayment of the loan if your cash flow from the business is insufficient to fulfill the obligation.

A)Character
B)Capital
C)Collateral
D)Capacity

Question 19

A line of credit typically has to be repaid within:

A)30 days
B)6 months
C)1 year
D)10 years

Question 20

All of the following are advantages of debt financing,except:

A)It's useful for meeting a short-term deficit in cash flow.
B)The term of the debt (loan)is generally limited.
C)Interest paid is tax deductible.
D)If it is a "demand" loan,it can be called by the lender at any time.

Question 21

Many Canadians believe that Ontarians pay the highest HST rates in Canada,however,which of the following provinces actually pay more than those living in the province of Ontario?

A)Saskatchewan
B)New Brunswick
C)British Columbia
D)Nova Scotia

Question 22

_______ is an organization run almost entirely by students whose purpose is to get students to build startups.

A)Indiegogo
B)TheFounderProject
C)Idea Cafe
D)Kickstarter

Question 23

Describe some of the advantages of financing company activities with equity.

Question 24

Describe the profile of the typical angel investor.

Question 25

Describe the advantages of using debt to raise money for capital expenditures.

Question 26

The interest that a company pays to its bondholders is tax deductible.

Question 27

Bank loans,both operating and term loans,are demand loans so that regardless of the term,the bank can and will demand they be paid back if it feels the company is getting into trouble.

Question 28

What are the 5 C's of Credit?

Question 29

As of April 1,2013,the HST rate in Ontario is:

A)3%
B)8%
C)13%
D)15%

Question 30

The problem with using debt to finance business activities is that it can be difficult to service and a burden on your cash flows.

Question 31

Providers of equity capital do not expect to receive interest payments but rather hope to share in the future profits of the business.

Question 32

Equity funding is money supplied by a financial institution in exchange for periodic interest payments and a promise to repay the principal at a specified maturity date.

Question 33

How can an IPO be used as an exit strategy?

Question 34

What is meant by working capital?

Question 35

High-risk ventures are more likely to secure debt financing than equity financing.

Question 36

Explain the concept of "bootstrapping".

Question 37

_______ is a crowdfunding site where you put together a project and look for funding.If the project succeeds in reaching its funding goal,all backers' credit cards are charged.If the project falls short,no one is charged.

A)Indiegogo
B)TheFounderProject
C)Idea Cafe
D)Kickstarter

Question 38

In Canada,it is not mandatory for a small business to open an HST or GST account until their revenues reach:

A)$1000
B)$10,000
C)$30,000
D)$100,000

Question 39

The most common source of equity financing for startup businesses is from venture capitalists.

Question 40

It is estimated that between 75 and 85 percent of new startups use some form of bootstrapping to help finance themselves.

Question 41

Why might a small business,with revenues less than $30,000,register for an HST or GST account?

Question 42

What are some of the less well-known allowable expenses permitted by the Canada Revenue Agency?