Question 1

Which of the following is a characteristic of a typical private placement of debt?

Accepted Answer

A) It carries a variable interest rate. 
B) Its maturity is shorter than most bank loans. 
C) Because of the higher risk,more restrictions are imposed on the borrower than with a comparable bank loan. 
D) It operates much like a bond,but its terms are tailored to the borrower's individual needs,as a loan would be.

Question 2

Factoring:

Accepted Answer

A) is a more expensive method of financing than borrowing from a bank. 
B) places the risk of uncollected accounts receivable on the small business owner. 
C) is best used as a long-term source of capital. 
D) is a type of trade credit.

Question 3

The goal of regulation S-B's simplified registration process is to make it easier for small companies to go public by cutting the paperwork and the costs of raising capital.

Accepted Answer

A) True 
 B)False

Question 4

The average interest rates on SBA-guaranteed loans is:

Accepted Answer

A) prime-minus-2-percent. 
B) 2 percent. 
C) prime-plus-2-percent. 
D) 7 percent.

Question 5

On a margin loan,if the value of the borrower's investment portfolio drops,the broker can make a margin call,requiring the borrower to provide more cash or securities as collateral,within a matter of days or even hours.

Accepted Answer

A) True 
 B)False

Question 6

Companies issuing bonds to raise capital must follow the same regulations that govern businesses making public stock offerings.

Accepted Answer

A) True 
 B)False

Question 7

Savings and loan associations typically specialize in loans for:

Accepted Answer

A) equipment. 
B) inventory. 
C) real property. 
D) accounts receivable.

Question 8

Most equipment vendors encourage business owners to purchase their equipment by offering to finance the purchase and this method of financing is similar to trade credit.

Accepted Answer

A) True 
 B)False

Question 9

Venture capitalists look for ________ as the most important ingredient in the success of any business.

Accepted Answer

A) innovation 
B) a growth industry 
C) a competitive edge 
D) competent management

Question 10

Which of the following is a disadvantage of making a public stock offering through a Small Company Offering Registration (SCOR)?

Accepted Answer

A) Every state in which the offering is made must approve it. 
B) A limited secondary market for the securities may limit investors' interest in the offering. 
C) A company can raise no more than $1 million in a 12-month period. 
D) All of the above

Question 11

Unable to find financing elsewhere,many entrepreneurs launch their companies using the fastest and most convenient source of debt capital available: credit cards.

Accepted Answer

A) True 
 B)False

Question 12

Rather than piecing together their startup capital from multiple sources as they have in the past,entrepreneurs now are relying on a single source of funding.

Accepted Answer

A) True 
 B)False

Question 13

Small business lending companies (SBLCs)make only intermediate and long-term SBA-guaranteed loans that many banks would not consider.

Accepted Answer

A) True 
 B)False

Question 14

Bootstrap financing describes using internal,and often creative,methods of financing a company's need for capital.

Accepted Answer

A) True 
 B)False

Question 15

Explain the differences in the lending practices of commercial banks,commercial finance companies,and savings and loans associations.

Accepted Answer

The answer of Explain the differences in the lending practices...

Question 16

Although there is no limit on the amount of stock it can buy,a typical venture capital firm will purchase ________ percent of the ownership in a small firm.

Accepted Answer

A) 10-20 
B) 20-40 
C) 50-60 
D) 80-90

Question 17

When looking for an angel,the key is:

Accepted Answer

A) networking. 
B) waiting until you need the money. 
C) looking across industries. 
D) using computer matches.

Question 18

The general trend of angel financing is that it has ________ as a source of capital for entrepreneurs over the past 7 years.

Accepted Answer

A) increased 
B) stabilized 
C) decreased 
D) disappeared

Question 19

Capital is any form of wealth employed to produce more wealth.

Accepted Answer

A) True 
 B)False

Question 20

Private investors look to earn the return on their investments in a business through the increased value of the business,not through dividends and interest.

Accepted Answer

A) True 
 B)False

Exam 13: Sources of Financing: Debt and Equity

Which of the following is a characteristic of a typical private placement of debt?

Factoring:

The goal of regulation S-B's simplified registration process is to make it easier for small companies to go public by cutting the paperwork and the costs of raising capital.

The average interest rates on SBA-guaranteed loans is:

On a margin loan,if the value of the borrower's investment portfolio drops,the broker can make a margin call,requiring the borrower to provide more cash or securities as collateral,within a matter of days or even hours.

Companies issuing bonds to raise capital must follow the same regulations that govern businesses making public stock offerings.

Savings and loan associations typically specialize in loans for:

Most equipment vendors encourage business owners to purchase their equipment by offering to finance the purchase and this method of financing is similar to trade credit.

Venture capitalists look for ________ as the most important ingredient in the success of any business.

Which of the following is a disadvantage of making a public stock offering through a Small Company Offering Registration (SCOR) ?

Unable to find financing elsewhere,many entrepreneurs launch their companies using the fastest and most convenient source of debt capital available: credit cards.

Rather than piecing together their startup capital from multiple sources as they have in the past,entrepreneurs now are relying on a single source of funding.

Small business lending companies (SBLCs)make only intermediate and long-term SBA-guaranteed loans that many banks would not consider.

Bootstrap financing describes using internal,and often creative,methods of financing a company's need for capital.

Explain the differences in the lending practices of commercial banks,commercial finance companies,and savings and loans associations.

Although there is no limit on the amount of stock it can buy,a typical venture capital firm will purchase ________ percent of the ownership in a small firm.

When looking for an angel,the key is:

The general trend of angel financing is that it has ________ as a source of capital for entrepreneurs over the past 7 years.

Capital is any form of wealth employed to produce more wealth.

Private investors look to earn the return on their investments in a business through the increased value of the business,not through dividends and interest.