Question 1

Factors typically discount ________ percent of the face value of a company's accounts receivable.

Accepted Answer

A)  5 - 40 
B)  10 - 20 
C)  60 - 95 
D)  95 - 100

Question 2

Rather than relying primarily on a single source of funds as they have in the past, entrepreneurs today must piece together their capital from multiple sources, a method known as layered financing.

Accepted Answer

A) True 
 B)False

Question 3

Entrepreneurs are most likely to give up more equity in their businesses in the ________ phase of their companies than in any other.

Accepted Answer

A)  startup 
B)  product development 
C)  product testing 
D)  product shipping

Question 4

Entrepreneurs basically "borrow from themselves" by pledging their ________ as collateral for the loans they receive in a ________ .

Accepted Answer

A)  business; commercial loan 
B)  business assets; home equity loan 
C)  home; home equity loan 
D)  big ticket items; floor loan

Question 5

Bootstrapping is a method of raising capital that taps the power of social networking and allows entrepreneurs to post their elevator pitches and proposed investment terms on specialized Web sites and raise money from ordinary people who invest as little as $100.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Sarah's aunt and cousin have offered to provide some financial assistance for her new business. Should an entrepreneur turn to friends and family members for money to launch a company? Why or why not? If so, under what conditions?

Accepted Answer

The answer of Sarah's aunt and cousin have offered to...

Question 8

A bank loan that imposes restrictions or covenants on the business decisions an entrepreneur makes concerning the company's operations is called a:

Accepted Answer

A)  home equity loan. 
B)  floor planning. 
C)  term loan. 
D)  line of credit.

Question 9

What is involved with vendor financing in the form of trade credit? How important is it as a source of debt financing to small firms? What role does it play in "bootstrapping"? What are some other bootstrapping techniques?

Accepted Answer

The answer of What is involved with vendor financing in...

Question 10

A boat retailer would most likely use a line of credit to finance the purchase of her inventory.

Accepted Answer

A) True 
 B)False

Question 11

In the ________ program, participating lenders use their own loan procedure and applications to make loans of up to $350,000 to small businesses and the SBA guarantees 50 percent of the loan. .

Accepted Answer

A)  loan guarantee 
B)  SBA loan 
C)  Community Advantage Loan 
D)  SBAExpress

Question 12

Grants to small businesses made to strengthen the local economy in cities and towns that are considered economically distressed are made by:

Accepted Answer

A)  the Department of Housing and Urban Development. 
B)  a local development company. 
C)  U.S. Department of Agriculture's Rural Business Co-op services. 
D)  the Economic Development Administration.

Question 13

Mini-Case 13-1: "Where do I go now ...?
Christine Hernandez is in the process of launching a restaurant. Christine has never owned her own restaurant before, but she has worked for two of the best restaurants in town. Starting out as a hostess, Christine developed a special knack for the business and quickly worked her way up to the job of manager. Her 18 years of experience have given her a solid foundation for running her own restaurant.
Christine has worked with a counselor at a nearby Small Business Development Center and a counselor from the Service Corps of Retired Executives to prepare a business plan. She asked two other consultants and an accountant to review the plan and incorporated their suggestions into the finished product. When Christine took her plan to her bank, however, the bank turned down her loan request of $165,000, citing the venture as "too risky, given the failure rate of restaurants." The bank acknowledged her experience as "a major asset," but said that it "could not expose itself to such risks in its portfolio." Christine heard the same story from three other banks.
Christine is confident in her ability to manage her own restaurant successfully, and she is determined to get the financing she needs to launch it.
-Review the various loan programs under the Small Business Administration designed to help finance businesses like Christine's. Which of these programs would most likely help Christine get the capital she needs?

Accepted Answer

The answer of Mini-Case 13-1: "Where do I go now...

Question 14

If banks refuse to lend money to a startup business, the owner usually cannot convince his or her vendors and suppliers to extend trade credit either.

Accepted Answer

A) True 
 B)False

Question 15

Less than ________ percent of all U.S. companies are publicly held corporations.

Accepted Answer

A)  1 
B)  5 
C)  10 
D)  12

Question 16

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 17

In a Regulation D stock offering, the company:

Accepted Answer

A)  sells its shares directly to private investors. 
B)  makes a private placement without actually "going public." 
C)  does not have to register its shares with the SEC. 
D)  All of the above

Question 18

Few companies with less than $25 million in annual sales manage to go public successfully.

Accepted Answer

A) True 
 B)False

Question 19

Asset-based loans are an expensive method of financing because of the cost of originating and maintaining them and the higher risk involved.

Accepted Answer

A) True 
 B)False

Question 20

The majority of loans provided by the SBA are:

Accepted Answer

A)  direct. 
B)  preferred. 
C)  guaranteed. 
D)  asset based.

Exam 13: Sources of Financing: Debt and Equity

Factors typically discount ________ percent of the face value of a company's accounts receivable.

Rather than relying primarily on a single source of funds as they have in the past, entrepreneurs today must piece together their capital from multiple sources, a method known as layered financing.

Entrepreneurs are most likely to give up more equity in their businesses in the ________ phase of their companies than in any other.

Entrepreneurs basically "borrow from themselves" by pledging their as collateral for the loans they receive in a .

Bootstrapping is a method of raising capital that taps the power of social networking and allows entrepreneurs to post their elevator pitches and proposed investment terms on specialized Web sites and raise money from ordinary people who invest as little as $100.

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

Sarah's aunt and cousin have offered to provide some financial assistance for her new business. Should an entrepreneur turn to friends and family members for money to launch a company? Why or why not? If so, under what conditions?

A bank loan that imposes restrictions or covenants on the business decisions an entrepreneur makes concerning the company's operations is called a:

What is involved with vendor financing in the form of trade credit? How important is it as a source of debt financing to small firms? What role does it play in "bootstrapping"? What are some other bootstrapping techniques?

A boat retailer would most likely use a line of credit to finance the purchase of her inventory.

In the ________ program, participating lenders use their own loan procedure and applications to make loans of up to $350,000 to small businesses and the SBA guarantees 50 percent of the loan. .

Grants to small businesses made to strengthen the local economy in cities and towns that are considered economically distressed are made by:

If banks refuse to lend money to a startup business, the owner usually cannot convince his or her vendors and suppliers to extend trade credit either.

Less than ________ percent of all U.S. companies are publicly held corporations.

Factoring:

In a Regulation D stock offering, the company:

Few companies with less than $25 million in annual sales manage to go public successfully.

Asset-based loans are an expensive method of financing because of the cost of originating and maintaining them and the higher risk involved.

The majority of loans provided by the SBA are: