Question 1

Core values of a business include:

Accepted Answer

A)  corporate creed 
B)  mission statement 
C)  human resource policies 
D)  customer service policies 
E)  all of the above E

Question 2

Advantages of going public include the following EXCEPT:

Accepted Answer

A)  higher cost of capital 
B)  access to capital for future growth 
C)  increased liquidity for shareholders 
D)  diversification opportunity for entrepreneurs 
E)  increased prestige and visibility A

Question 3

In a down round scenario with an anti-dilution provision and no minimum price,

Accepted Answer

A)  the new investor suffers all the losses and receives a smaller percentage ownership than she would in an up round 
B)  early investors suffer all the losses and their percentage ownerships would be smaller than in an up round 
C)  entrepreneurs suffer all the losses and their percentage ownerships would be smaller than in an up round 
D)  A and B 
E)  A, B, and C C

Question 4

Strategic partners include:

Accepted Answer

A)  friends and families 
B)  venture capital firms and angel investors 
C)  competitors or companies in a related industry 
D)  A and B 
E)  A, B, and C

Question 5

If an entrepreneur is able to sell a smaller percentage of the firm for the same amount of cash raised,

Accepted Answer

A)  she will have to issue more new shares 
B)  the pre-money valuation will increase but the post money valuation will decrease 
C)  the pre-money valuation will decrease but the post money valuation will increase 
D)  both the pre-money and post money valuation will increase 
E)  both the pre-money and post money valuation will decrease

Question 6

Anti-dilution provisions

Accepted Answer

A)  are always bad for entrepreneurs even in an up round 
B)  always protects the new investor and bad for both entrepreneurs and early investors 
C)  protects entrepreneurs in a down round but has no effect in an up round 
D)  protects early investors in a down round but has no effect in an up round 
E)  protects the new investor in a down round but has no effect in an up round

Question 7

Disadvantages of going public include the following EXCEPT:

Accepted Answer

A)  more time to focus on growth because of increased capital 
B)  SEC regulations on financial reporting and public disclosure 
C)  scrutiny by financial analysts 
D)  pressure to meet investor and analyst expectation 
E)  increased public scrutiny

Question 8

The central items to be negotiated when seeking funds from venture capital firms and angel investors include all of the following EXCEPT:

Accepted Answer

A)  the amount of control 
B)  the amount of future earnings 
C)  the amount cash received today 
D)  the number of shares 
E)  percentage ownership

Question 9

Anti-dilution provisions are also called

Accepted Answer

A)  poison pill provisions 
B)  golden parachute provisions 
C)  ratchet provisions 
D)  wrench provisions 
E)  trigger provisions

Question 10

Post money valuation after each round is established by

Accepted Answer

A)  the entrepreneurs 
B)  early investors 
C)  the new investor 
D)  jointly by A and B 
E)  Jointly by B and C

Exam 10: Exit and Harvest