Q&A Hero

Q: Growth of the venture: A.lessens pressures on existing financial resources. B.causes pressures on human resources. C.lessens legitimacy of the firm. D.lessens time spent on management decision making.

Q: Which of the following would NOT be a recommended diversification strategy? A.Backward integration. B.Horizontal integration. C.Forward integration. D.Integration into markets unrelated to existing products.

Q: In a horizontal diversification strategy, growth:A.involves taking a step back (up) the value-added chain.B.occurs at the same level of the value-added chain.C.involves taking a step forward (down) the value added chain.D.involves opportunities unrelated to the existing value-added chain.

Q: (p.362-363)A firm that manufactures washing machines starts to manufacture detergent illustrates _______ integration. A.Backward B.Forward C.Horizontal D.Side

Q: A computer company buys a hard-drive manufacturer. This is an example of: A.Backward integration B.Horizontal integration C.Forward integration D.Conglomerate integration

Q: ___________ refers to a diversification strategy that involves taking a step forward (down) on the value-added chain toward the customers. A.Backward integration B.Horizontal integration C.Forward integration D.Conglomerate integration

Q: ___________ refers to a diversification strategy that involves taking a step back (up) on the value chain toward the raw materials. A.Horizontal integration B.Backward integration C.Forward integration D.Conglomerate integration

Q: The _________ captures the steps it takes to develop raw materials into a product and get it into the hands of customers. A.value chain B.inventory C.electronic data interchange D.market accounting system

Q: _____ strategies involve selling a new product to a new market. A.Penetration B.Market development C.Product development D.Diversification

Q: _______ strategies involve developing and selling new products to people who are already purchasing the firm's existing products. A.Penetration B.Product development C.Market development D.Diversification

Q: ______ are used to characterize potential customers based upon their income, education, age, sex, and so forth. A.Demographics B.Development strategies C.Democracies D.Diversifications

Q: A market development strategy would not involve: A.selling the existing product in new locations. B.offering the same product to a different demographic group. C.using customer experience to develop new uses for the existing product. D.selling new products to consumer's purchasing the firm's existing products.

Q: Identify the main advantages and disadvantages of going public.

Q: Identify and describe, in order, each of the major stages of the venture capital process.

Q: List three reasons why a Business Angel may reject a proposal.

Q: Discuss the informal risk-capital market and key characteristics of business angels.

Q: What are the three types of risk capital markets?

Q: Under the ________, reporting requirements are increased and due dates of reports to the SEC are accelerated.A.Sarbanes-Oxley ActB.Blue sky lawsC.Securities Regulation ActD.Social Security Act

Q: Sales of stock within an individual state are regulated by: A.the Securities and Exchange Commission. B.the NASD. C.the Internal Revenue Service. D.blue sky examiners.

Q: The waiting period is the time between: A.hiring an underwriter and waiting to file the registration statement. B.filing the registration statement and the SEC's reviewing to determine the adequacy of the disclosure. C.the initial filing of the registration statement and its effective date. D.after the initial public offering has been sold and before the listing.

Q: With the enactment of the Sarbanes-Oxley Act in 2002: A.the expense and administrative responsibilities of being a public company are significantly lower. B.corporate governance and disclosure requirements of public companies is subject to greater regulation. C.the liability risks of officers and directors less stringent. D.the recruitment of qualified independent directors is simpler.

Q: Going public: A.is often viewed negatively by risk-averse venture capitalists. B.ensures that the company gains control in decision making. C.increases flexibility for the company. D.enhances the company's ability to obtain future funds.

Q: _______________ is the form of the transaction when money is obtained by a company. A.Deal structure B.Underwriting C.Equity swap D.Debt swap

Q: In the valuation of Internet companies: A.the book value approach is of primary importance. B.the replacement value approach plays a significant role. C.the qualitative portion of due diligence carries much more weight. D.the factor approach is used the overall value.

Q: The valuation approach that gives the lowest value of the business is: A.book value. B.liquidation value. C.present value of future cash flows. D.earnings approach.

Q: The factor approach: A.uses the net tangible asset value in valuation. B.is used only for insurance purposes. C.uses earnings, dividend capacity, and book value. D.assesses the comparable publicly held companies to determine the company's worth.

Q: Which of the methods of valuation of a company provides the potential investor with the best estimate of the probable return on investment? A.Book value B.Earnings approach C.Present value of future cash flows D.Liquidation value

Q: Using the __________ method of evaluating the firm, cash flow is adjusted for the time value of money. A.present value of future cash flow B.replacement value C.book value D.earnings approach

Q: Dividing net profit by total assets shows a firm's: A.current ratio. B.debt ratio. C.net profit margin. D.return on investment.

Q: The ____ is calculated by dividing liabilities by total assets. A.debt ratio B.current ratio C.inventory turn over D.net profit margin

Q: The least liquid current asset, _____, is eliminated when calculating the acid test ratio. A.cash B.accounts receivable C.inventory D.land

Q: The ____ is calculated by dividing accounts receivable by average daily sales. A.current ratio B.average collection period C.debt ratio D.return on investment

Q: The ____ is used to measure the short-term solvency of a venture. A.return on investment B.average collection period C.debt ratio D.current ratio

Q: Which factor in valuing your company is the most important? A.Future earnings capacity B.Book value C.Outlook of the economy D.Market price of similar companies' stocks

Q: Venture capitalists: A.usually don't know one another. B.tend to put more time and effort into business plans that were referred to them. C.tend to invest in any area that has a good rate of return. D.like entrepreneurs to bring in an accountant to verify financials.

Q: Venture capitalists are typically located in all of the following areas except: A.Los Angeles B.New York C.Virginia D.Chicago

Q: The longest stage of the venture capital process, at 1-3 months, is: A.preliminary screening. B.final approval. C.agreement on principal terms. D.due diligence.

Q: The due diligence phase of the venture-capital process includes: A.outlining the principle terms. B.a detailed review of the company's history. C.preparation of an investment memorandum. D.a preliminary study of the business plan.

Q: Venture capital firms expect returns in the range of: A.15-20%. B.25-35%. C.40-60%. D.100%.

Q: What are the 4 main growth strategies discussed in the text?Briefly define each.

Q: Identify and describe the three major types of diversification growth strategies.

Q: Discuss the three types of market development strategies and give examples of each.

Q: Entrepreneurs in the _____________ quadrant of firm growth aspire to grow their businesses and possess the ability to do so.A.Constrained growthB.Unused potential for growthC.Actual growthD.Little potential

Q: Entrepreneurs in the _____________ quadrant of firm growth possess the abilities to grow but do not aspire to grow their businesses. A.Constrained growth B.Unused potential for growth C.Actual growth D.Little potential

Q: Entrepreneurs in the _____________ quadrant of firm growth aspire to grow their businesses but do not possess the ability to do so. A.Constrained growth B.Unused potential for growth C.Actual growth D.Little potential

Q: Entrepreneurs who have the necessary abilities for the transition to more professional management practices and the aspiration to grow their business:A.have little potential for firm growth.B.will achieve growth only if the entrepreneur replaces himself or herself with a professional manager.C.are the most likely to achieve growth.D.usually form life-style firms.

Q: The entrepreneur has which of the following responsibilities regarding taxes?A.Withhold federal and state taxes for employees.B.Pay state and federal unemployment taxes.C.File end-of-year tax returns.D.All of these.

Q: Venture capital firms expect returns in the range of: A.15-20%. B.25-35%. C.40-60%. D.100%.

Q: Which section of the business plan is used for initial screening and provides the starting point for the venture-capital process? A.The executive summary B.The industry and market analysis C.The mission statement D.Strategic plan

Q: In the venture-capital process, ______ is(are) absolutely essential for preliminary screening. A.debt financing B.a business plan C.a sales-orientation D.endowment funds

Q: In most cases, the venture capitalist: A.seeks control of the company. B.would prefer to not be a part of the board of directors. C.is not involved in developing strategic plans. D.expects the management team to run the daily operations.

Q: In 2014 which region received the highest level of venture capital investment? A.New England B.Silicon Valley C.NYC Metro D.LA/Orange County

Q: The largest percentage of venture capital funding is invested in: A.seed capital. B.start-up capital. C.expansion funds. D.acquisition funds.

Q: The top area of venture capital investment in 2011 was in: A.software. B.telecommunications. C.media and entertainment. D.banking.

Q: Which of the following was not one of the top industries where venture capital was invested in 2011? A.Software B.Biotechnology C.Industrial/energy D.Telecommunications

Q: In a private venture capital firm, the _______ manages the fund in exchange for a management fee and a percentage of profits. A.limited partner B.general partner C.entrepreneur D.referral source

Q: ________ were authorized in 1958 to marry private capital and government funds for investment in small companies.A.Research and development limited partnershipsB.State-sponsored venture-capital fundsC.Small business investment companies (SBICs)D.Computerized entrepreneur-investor matching systems

Q: Which of the following would not typically be part of a private venture capital fund? A.Money from state governments B.Money from insurance companies C.Money from pension funds D.Money from college endowment funds

Q: Business angels usually find their deals through: A.the internet. B.referral sources. C.venture capitalists. D.cold calling.

Q: A business angel's investment time horizon is usually: A.1-2 years. B.3-4 years. C.5-6 years. D.7-10 years.

Q: Business angels typically invest what amount in the businesses they finance? A.$50,000-$100,000 B.$100,000-$500,000 C.$500,000-$1,000,000 D.$1,000,000-$5,000,000

Q: The informal risk-capital market is made up of: A.angels. B.stockbrokers. C.venture capitalists. D.commercial banks.

Q: The best source of funds for first-stage financing is the: A.private venture capital companies. B.small business investment companies. C.informal risk capital market. D.public equity market.

Q: Which type of risk-capital market is available as a funding source only for high-potential ventures? A.Informal risk capital market B.Private venture capital companies C.Small business investment companies D.Public equity market

Q: Early stage financing is typically: A.easier to obtain than expansion financing. B.called seed or start-up capital. C.where venture capitalists are highly involved. D.used as working capital to support initial growth.

Q: Venture capital firms prefer to invest in: A.high-potential ventures. B.conventional small businesses. C.privately-held middle market firms. D.ventures during the early stages.

Q: Blue-sky laws may speed up the process and lessen costs to the company going public.

Q: The quiet period is a 90-day period in going public when company information that will help increase stock price should and can be released.

Q: After the completion of the preliminary preparation, the first public offering normally requires three to six months to prepare, print, and file the registration statement with the SEC.

Q: The underwriter is of critical importance in establishing the initial price for the stock of the company.

Q: The shorter the time before a company goes public, given that profits and sales growth occur, the less percentage of equity the entrepreneur will have to give up per dollar invested.

Q: For a company to go public, larger underwriting firms have more stringent criteria, such as sales as high as $50 million to $100 million, and a 40 to 70 percent annual growth rate.

Q: In most of the significant public offerings, the company technically sells the shares to the underwriters, who then resell the shares to the public investors.

Q: With the enactment of the Sarbanes-Oxley Act in 2002, the expense and administrative responsibilities of being a public company, as well as the liability risks of officers and directors, are significantly greater.

Q: Making long-term decisions can be difficult in publicly traded companies where sales and profit evaluations indicate the capability of management via stock values.

Q: Two major disadvantages of going public are the increased reporting requirements and potential loss of control.

Q: Venture capitalists view going public a highly disadvantageous step since the level of risks involved substantially increase.

Q: The three main advantages of going public are obtaining new capital, realizing an enhanced valuation, and enhancing the company's ability to obtain future funds.

Q: The valuation approach that gives the lowest value of the business is the earnings approach.

Q: The earnings approach is the most widely used method of valuing a company.