Question 1

The problem with the lack of funding for start-ups is that the seed capital and funding sources just aren't there.

Accepted Answer

A) True 
 B)False  False

Question 2

The credit crunch has hit those entrepreneurs seeking between $100,000 and ________.

Accepted Answer

A) $3 million 
B) $500,000 
C) $1 million 
D) $750,000 
A) $3 million 
B) $500,000 
C) $1 million 
D) $750,000 A

Question 3

A small company needs fixed capital to expand and grow the business.

Accepted Answer

A) True 
 B)False  False

Question 4

A(n)________ is a private,for-profit organization that purchases equity positions in young businesses that will potentially produce returns of 300 to 500 percent over five to seven years.

Accepted Answer

A) commercial bank 
B) venture capital company 
C) "angel" 
D) SB-1 filing 
A) commercial bank 
B) venture capital company 
C) "angel" 
D) SB-1 filing

Question 5

In a best efforts agreement,the underwriter agrees to purchase all of the shares in the offering.

Accepted Answer

A) True 
 B)False

Question 6

The single most important ingredient in making a successful public offering is:

Accepted Answer

A) choosing a capable underwriter. 
B) negotiating a favorable letter of intent. 
C) preparing a suitable registration statement. 
D) filing Regulation D with the SEC. 
A) choosing a capable underwriter. 
B) negotiating a favorable letter of intent. 
C) preparing a suitable registration statement. 
D) filing Regulation D with the SEC.

Question 7

A ________ outlines the details of the deal in an IPO.

Accepted Answer

A) roadshow 
B) lock-up agreement 
C) letter of intent 
D) registration statement 
A) roadshow 
B) lock-up agreement 
C) letter of intent 
D) registration statement

Question 8

Layered financing is the process of piecing start-up capital together from a variety of sources rather than relying on a single source of funds.

Accepted Answer

A) True 
 B)False

Question 9

An advantage of using friends and relatives as investors is that:

Accepted Answer

A) they tend to be more patient. 
B) they take a lower return. 
C) they don't want controlling interest in the company. 
D) they don't tend to have unrealistic expectations. 
A) they tend to be more patient. 
B) they take a lower return. 
C) they don't want controlling interest in the company. 
D) they don't tend to have unrealistic expectations.

Question 10

Most venture capitalists prefer to purchase ownership through common stock or convertible preferred stock.

Accepted Answer

A) True 
 B)False

Question 11

________ is any form of wealth used to produce more wealth.

Accepted Answer

A) Debt 
B) Equity 
C) Capital 
D) Capacity 
A) Debt 
B) Equity 
C) Capital 
D) Capacity

Question 12

A ________ agreement prevents the sale of insider shares for a specific time period.

Accepted Answer

A) lock-up 
B) pre-nuptial 
C) road show 
D) registration 
A) lock-up 
B) pre-nuptial 
C) road show 
D) registration

Question 13

Most of the start-up businesses that attract venture capital are technology companies.

Accepted Answer

A) True 
 B)False

Question 14

The "wait to go effective" is the time period when:

Accepted Answer

A) the SEC registration statement is being prepared. 
B) the underwriter decides what regulation to file under. 
C) the firm prices the stock for the offering. 
D) the company is waiting for SEC approval after filing the registration statement. 
A) the SEC registration statement is being prepared. 
B) the underwriter decides what regulation to file under. 
C) the firm prices the stock for the offering. 
D) the company is waiting for SEC approval after filing the registration statement.

Question 15

Probably the biggest disadvantage of "going public" to the entrepreneur is the:

Accepted Answer

A) dilution of ownership interest. 
B) diminished corporate image. 
C) future threat of being acquired through the use of stock. 
D) loss of key employees. 
A) dilution of ownership interest. 
B) diminished corporate image. 
C) future threat of being acquired through the use of stock. 
D) loss of key employees.

Question 16

A lock-up agreement:

Accepted Answer

A) prevents the sale of "insider" shares for a specific period of time-often 12 to 36 months-after an initial public offering (IPO). 
B) prevents a small company from signing on with other underwriters to make an IPO. 
C) prevents a company about to make an IPO from signing a union contract. 
D) establishes the final price of the IPO so that it cannot fluctuate before the stock offering is actually made. 
A) prevents the sale of "insider" shares for a specific period of time-often 12 to 36 months-after an initial public offering (IPO). 
B) prevents a small company from signing on with other underwriters to make an IPO. 
C) prevents a company about to make an IPO from signing a union contract. 
D) establishes the final price of the IPO so that it cannot fluctuate before the stock offering is actually made.

Question 17

A disadvantage of using friends and relatives as investors is:

Accepted Answer

A) they tend to demand more stock options. 
B) familial seniority often conflicts with the "chain of command." 
C) they require more leniency with benefits and pay. 
D) unrealistic expectations or misunderstood risks destroy friendships or family relationships. 
A) they tend to demand more stock options. 
B) familial seniority often conflicts with the "chain of command." 
C) they require more leniency with benefits and pay. 
D) unrealistic expectations or misunderstood risks destroy friendships or family relationships.

Question 18

In an IPO,the letter of intent outlines the details of the deal.

Accepted Answer

A) True 
 B)False

Question 19

"Angels" usually prefer to invest in businesses they know something about.

Accepted Answer

A) True 
 B)False

Question 20

The angel market is:

Accepted Answer

A) fragmented. 
B) concentrated. 
C) formalized. 
D) centralized. 
A) fragmented. 
B) concentrated. 
C) formalized. 
D) centralized.

Exam 16: Sources of Equity Financing

The problem with the lack of funding for start-ups is that the seed capital and funding sources just aren't there.

The credit crunch has hit those entrepreneurs seeking between $100,000 and ________.

A small company needs fixed capital to expand and grow the business.

A(n)________ is a private,for-profit organization that purchases equity positions in young businesses that will potentially produce returns of 300 to 500 percent over five to seven years.

In a best efforts agreement,the underwriter agrees to purchase all of the shares in the offering.

The single most important ingredient in making a successful public offering is:

A ________ outlines the details of the deal in an IPO.

Layered financing is the process of piecing start-up capital together from a variety of sources rather than relying on a single source of funds.

An advantage of using friends and relatives as investors is that:

Most venture capitalists prefer to purchase ownership through common stock or convertible preferred stock.

________ is any form of wealth used to produce more wealth.

A ________ agreement prevents the sale of insider shares for a specific time period.

Most of the start-up businesses that attract venture capital are technology companies.

The "wait to go effective" is the time period when:

Probably the biggest disadvantage of "going public" to the entrepreneur is the:

A lock-up agreement:

A disadvantage of using friends and relatives as investors is:

In an IPO,the letter of intent outlines the details of the deal.

"Angels" usually prefer to invest in businesses they know something about.

The angel market is:

Entrepreneurs: the Driving Force Behind Small Business

Ethics and Social Responsibility: Doing the Right Thing

Creativity and Innovation: Keys to Entrepreneurial Success

Strategic Management and the Entrepreneur

Choosing a Form of Ownership

Franchising and the Entrepreneur

Buying an Existing Business

New Business Planning Process: Feasibility Analysis,business Modeling,

Building a Bootstrap Marketing Plan

Creative Use of Advertising and Promotion

Pricing and Credit Strategies

Global Marketing Strategies

E-Commerce and Entrepreneurship

Creating a Solid Financial Plan

Managing Cash Flow

Sources of Debt Financing

Location,layout,and Physical Facilities

Supply Chain Management

Managing Inventory

Staffing and Leading a Growing Company

Management Succession and Risk Management Strategies in the Family Business

The Legal Environment: Business Law and Government Regulation

Filters