Q&A Hero

Entrepreneurship

Q: An extension of the earnings approach is the book value method.
Q: Replacement value is used only by insurance companies and in very unique circumstances.
Q: The present value of future cash flow method of valuation considers the firm's cash flow in relation to the time value of money.
Q: The return on investment ratio measures the ability of the firm to repay long-term debt using current assets.
Q: The debt ratio is calculated by dividing total liabilities by total inventory.
Q: The inventory turnover ratio measures the efficiency of the venture in managing its inventory.
Q: The current ratio is used to measure the long-term solvency of the venture and its ability to meet short-term debts.
Q: Financial ratios are control mechanisms to test the financial strengths of a new venture.
Q: The future earnings capacity of the company is the most important factor in valuation.
Q: Balance sheet items are carried at cost, a good indicator of fair market value in valuing a company.
Q: In order to increase their chances for success, an entrepreneur should approach all possible venture capital firms with proposals.
Q: Venture capitalists tend to avoid investment proposals that are referred from lawyers and accountants.
Q: The detailed review of a potential venture capital deal is called diligent research.
Q: For the venture capitalist, the executive summary is an important part of the business plan.
Q: To attract venture capital funding, an investment must have significant capital appreciation potential.
Q: A venture capitalist would rather invest in a first-rate product and a second-rate management team than the reverse.
Q: There is more risk involved in financing a business's early operations, therefore, higher rates of return are expected.
Q: Most venture capital deals have been made in California and Massachusetts.
Q: In 2011 venture capital deals were concentrated in the three areas of software, biotechnology and industrial/energy.
Q: In private venture capital firms, limited partners provide the funding and the general partner manages the fund.
Q: SBIC firms are small companies with some government money that invest in other companies.
Q: Private venture capital firms use both state and federal grant money to invest in other businesses.
Q: The Small Business Investment Company Act of 1958 married the use of private capital with government funds to finance small businesses.
Q: Endowment and pension funds can be part of venture capital equity pools.
Q: Venture capital firms are pools of equity managed by large corporations.
Q: Business angels find many of their deals through friends, investment bankers, business brokers and other business associates.
Q: Angel investors typically finance firms that are close to their homes.
Q: Angel investors usually expect to play an active role in the businesses they invest in.
Q: Angel investors typically invest between $500,000-$1,000,000.
Q: Angel investors have a longer investment horizon than venture capitalists do.
Q: Most angel investors are individuals who accumulated their wealth through inheritance.
Q: The informal investment market contains the smallest pool of risk capital in the U.S.
Q: Business angels are members of a professionally managed group of wealthy individuals who efficiently distribute risk capital.
Q: The public equity market is available only for high-potential ventures.
Q: Venture capital firms generally prefer a minimum funding level of $100,000.
Q: Early-stage financing is usually the least costly type of financing to obtain.
Q: Explain what problems an entrepreneur might avoid by using bootstrap financing instead of outside capital.
Q: Explain the three major components of an R&D partnership.
Q: Identify and explain the four types of loans used for cash flow financing.
Q: Explain and define the four types of asset backed loans.
Q: Give examples of internal and external sources of funding.
Q: __________ financing involves using any possible methods for conserving cash. A.Bootstrapping B.SBIR C.Private placement D.Floor planning
Q: Outside financing: A.usually takes between 15 days to three months to raise capital. B.increases the company's flexibility. C.increases the venture's impulse to spend. D.increases a firm's drive for sales and profits.
Q: Which of the following statement is(are) true? A.Rule 505 permits the sale of $10 million of unregistered securities in the private offering in any 12-month period. B.Rule 504 and 505 permit no general advertising or solicitation through public media. C.Rule 506 provides the first exemption to a company seeking to raise a small amount of capital from numerous investors. D.The entrepreneur issuing the private offering is spared the burden of proving that the exemptions granted have been met.
Q: Accredited investors are: A.investors who purchase over $5,000 of the venture's securities. B.investors with incomes in excess of $1,000,000 in each of the last two years. C.investors whose net worth is $500,000 or less. D.directors, executive officers, and general partners of the issuing company.
Q: Private offerings: A.must comply with Regulation D. B.involve more time and expense than public offerings. C.do not involve the SEC. D.are not a viable option for new ventures.
Q: Obtaining funds from private investors: A.is inappropriate for new ventures. B.is a public offering. C.is covered by Regulation D. D.involves a great deal of time and expense.
Q: Which grant program requires partners at universities or other non-profit institutions? A.The 504 program B.Small Business Innovation Research C.The SBA 7(a) D.Small Business Technology Transfer
Q: Under the ____________ program, federal agencies with budgets over $1 billion are required to set aside 0.3 percent for small businesses. A.Small Business Technology Transfer B.Small Business Innovation Research C.SBA Microloan D.Regulation D
Q: When a company receives an SBIR grant, any patent rights and software generated belong to: A.the Federal Government. B.the bank securing the loan. C.the Small Business Administration. D.the entrepreneur.
Q: In which phase of the SBIR grant process are funds used to create a prototype of a product or service? A.Phase I B.Phase II C.Phase III D.Phase IV
Q: During Phase II of an SBIR grant up to _______ can be awarded. A.$100,000 B.$500,000 C.$750,000 D.$1,000,000
Q: Which of the following is not true about the costs and benefits of R&D limited partnerships? A.Most are not successful B.Risk is reduced C.Costs can be high to create the partnership D.Most take at least 3 months to establish
Q: Most established R&D limited partnerships: A.allow a minimum amount of equity dilution. B.are successful. C.increase, to some extent, the risks involved in the venture. D.have weak financial statements due to lack of outside capital.
Q: Equity partnerships, royalty partnerships, and joint ventures are used in the ___________ stage of limited partnerships to reap the benefits of the effort. A.funding B.development C.exit D.all of these.
Q: In limited partnerships: A.the liability for any loss incurred is borne by the company. B.the sponsoring company acts as the general partner. C.there is no special tax benefit for partners. D.the sponsoring company does not retain rights to use any base technology to develop other products.
Q: Research and development limited partnerships provide funds for entrepreneurs in high-tech fields through: A.debt from lenders. B.equity from present owners. C.investors looking for tax shelters. D.cash from internal operations.
Q: All owners of ____ or more are required to personally guarantee an SBA loan. A.20% B.30% C.35% D.40%
Q: The SBA's primary business loan program is: A.the Microloan. B.the SBIR. C.the 7(a) loan. D.the 504.
Q: The Small Business 7(a) Guaranty program: A.guarantees up to 50 percent of the amount loaned. B.helps qualified small businesses obtain financing when they cannot obtain it through regular lending channels. C.has a maximum loan amount of $10 million. D.loans can be used only for machinery and equipment, and land and building.
Q: Which of the following is not one of the five C's of lending? A.Caution B.Character C.Conditions D.Capacity
Q: What type of cash flow financing loan can make funds available for up to 10 years? A.Character loans B.Real estate loans C.Long-term loans D.Installment loans
Q: In a straight commercial loan funds are typically used for what time period? A.Less than 30 days B.30-90 days C.180 days D.Up to one year
Q: Which of the following types of credit does not require the pledging of an individual's collateral or a cosigner? A.Line of credit B.Character loan C.Trust receipts D.Mortgage loan
Q: A "commitment fee" is used in arranging for a: A.commercial loan. B.character loan. C.installment loan. D.line of credit.
Q: Which of the following is not a form of cash flow financing? A.Trust receipt B.Character loan C.Line of credit D.Installment loan
Q: Mortgage financing is another term for: A.large equipment asset-based financing. B.real-estate asset-based financing. C.sale-leaseback financing. D.unsecured financing.
Q: In ____ the entrepreneur sells equipment to the lender then arranges for its continued use. A.a factoring arrangement B.trust receipts C.cash flow financing D.a sale-leaseback arrangement
Q: A trust receipt is a: A.type of accounts payable loan. B.type of real estate loan. C.type of inventory loan. D.type of cash flow financing loan.
Q: When the bank advances a large percentage of the invoice price of goods and is paid on a pro-rata basis when inventory is sold this is called: A.a trust receipt. B.a factoring arrangement. C.an accounts payable loan. D.a sale-leaseback arrangement.
Q: When inventory is the asset base for a loan: A.a trust receipt is not generally used. B.factoring may be arranged. C.about 50 percent of it can be financed. D.all of the inventory can be financed.
Q: A bank may finance up to ______ of a company's accounts receivable. A.50% B.60% C.70% D.80%
Q: In a factoring arrangement, the factor: A.takes no risk and sustains no losses. B."buys" the accounts receivables of a firm. C.receives no interest payment. D.pays a premium for the firm's assets.
Q: The most frequently used source of short-term funds when collateral is available is: A.SBA Microloans. B.SBA 7(a) loans. C.R&D limited partnerships. D.commercial bank loans.
Q: When using equity financing from family and friends: A.business arrangements should be in good faith. B.details such as terms of the investment and rights of the investor need not be in writing. C.they can be more patient than other investors in when they expect a return on investment. D.since the amount of money is usually small, they do have an ownership position in the venture.
Q: Funds obtained from ____ are the least expensive in terms of cost and control. A.the entrepreneur's personal resources B.friends and family C.commercial banks D.private placement
Q: The most frequently used source of funds for start-ups is: A.the entrepreneur's personal funds. B.bank loans. C.credit cards. D.SBA loans.
Q: Which of the following is not an example of internal financing? A.Profits B.Accounts receivable C.Credit from suppliers D.Equity financing
Q: ______ financing entails obtaining funds for the company in exchange for ownership. A.Bootstrap B.Equity C.Debt D.Commercial
Q: ________ financing does not require any collateral. A.Commercial bank loan B.Line of credit C.Equity D.Character loan
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