Question 1

Match the term with its definition.
-An installment loan from a seller of machinery used by a business

Accepted Answer

A)  asset-based loan
B)  basis point
C)  equipment loan
D)  LIBOR (London InterBank Offered Rate) 
E)  line of creditF) prime rate (base rate) G) purchase-order financingH) term loan C

Question 2

Match the term with its definition.
-A line of credit secured by working capital assets

Accepted Answer

A)  asset-based loan
B)  basis point
C)  equipment loan
D)  LIBOR (London InterBank Offered Rate) 
E)  line of creditF) prime rate (base rate) G) purchase-order financingH) term loan A

Question 3

Match the term with its definition.
-The interest rate charged by commercial banks on loans to their most creditworthy customers

Accepted Answer

A)  asset-based loan
B)  basis point
C)  equipment loan
D)  LIBOR (London InterBank Offered Rate) 
E)  line of creditF) prime rate (base rate) G) purchase-order financingH) term loan F

Question 4

Match the term with its definition.
-Money loaned for a 5- to 10-year term, corresponding to the length of time the investment will bring in profits

Accepted Answer

A)  asset-based loan
B)  basis point
C)  equipment loan
D)  LIBOR (London InterBank Offered Rate) 
E)  line of creditF) prime rate (base rate) G) purchase-order financingH) term loan

Question 5

The "five Cs of credit" are character, capacity, capital, conditions, and collateral.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following financing sources has the greatest advantage of speed?

Accepted Answer

A)   Local bank
B)   Credit card
C)   Angel investor
D)   Venture capitalist

Question 7

Match the term with its definition.
-Private individuals who invest in others' entrepreneurial ventures

Accepted Answer

A)  balloon payment
B)  business angels
C)  chattel mortgage
D)  crowdfunding
E)  factoringF) initial public offering (IPO) G) private placementH) real estate mortgage

Question 8

Glenda is trying to decide between the use of debt and the use of equity to finance her young business. She should remember that

Accepted Answer

A)   her return on assets will be less if she uses debt financing.
B)   using other people's money to finance one's business is seldom a good idea.
C)   the lender will have partial control of the business.
D)   debt must be repaid even if the company does not make a profit.

Question 9

Barry needs financing to start his inner-city venture. His goal is to provide part-time employment for at-risk youths to keep them off the streets and engaged in learning marketable skills. Barry may find some assistance from

Accepted Answer

A)   a community-based financial institution.
B)   the Small Business Innovative Research Program.
C)   a small business investment company.
D)   a venture capital firm.

Question 10

Match the definition with its term.
-An SBA program that provides short-term loans of up to $50,000 to small businesses and not-for-profit child-care centers

Accepted Answer

A)  7(a)  Loan Guaranty Program
B)  7(m)  Microloan Program
C)  Certified Development Company (CD
C)   504 Loan Program
D)  community-based financial institution
E)  formal venture capitalistsF) informal venture capitalG) loan covenantsH) Small Business Innovative Research (SBIR)  ProgramI) small business investment companies (SBICs)

Question 11

When considering a loan application, which of the five Cs is vital even if not sufficient alone to secure a loan?

Accepted Answer

A)   Capacity
B)   Capital
C)   Character
D)   Collateral

Question 12

Penelope is planning to launch her first business. She will most likely acquire her initial financing from

Accepted Answer

A)   venture capitalists.
B)   personal savings.
C)   wealthy individuals.
D)   the securities market.

Question 13

Even though Evan's company is a corporation, the bank imposed a loan covenant that required Evan to

Accepted Answer

A)   make a balloon payment after three years.
B)   pay a loan origination fee.
C)   make quarterly rather than monthly payments.
D)   personally guarantee the loan.

Question 14

Allie is starting a purse business and is considering using a crowdfunding portal to raise money for her small business. In order to do so, what requirements must be met by Allie? What potential problems with crowdfunding should she be aware of before she undertakes such an endeavor?

Accepted Answer

The answer of Allie is starting a purse business and...

Question 15

A line of credit is the _____ amount of credit a bank will provide a borrower at any one time.

Accepted Answer

A)   average
B)   annual
C)   maximum
D)   minimum

Question 16

Match the term with its definition.
-An informal agreement between a borrower and a bank as to the maximum amount of funds the bank will provide at any one time

Accepted Answer

A)  asset-based loan
B)  basis point
C)  equipment loan
D)  LIBOR (London InterBank Offered Rate) 
E)  line of creditF) prime rate (base rate) G) purchase-order financingH) term loan

Question 17

If a firm finances with equity rather than with debt, it will bear no interest expense and thus yield greater net profits.

Accepted Answer

A) True 
 B)False

Question 18

Common stock can be sold to underwriters, but they do not guarantee the sale of securities.

Accepted Answer

A) True 
 B)False

Question 19

Small Business Administration loans include guaranty loans and loans directly from the SBA.

Accepted Answer

A) True 
 B)False

Question 20

Harlan's customers have been a little slow in paying their invoices, and he is short on cash to pay his quarterly taxes. Harlan should consider

Accepted Answer

A)   sending the late payers to a collection agency.
B)   factoring.
C)   putting his late payers on credit hold until they pay up.
D)   taking out a personal loan to pay the taxes.

Exam 12: A Firms Sources of Financing

Match the term with its definition. -An installment loan from a seller of machinery used by a business

Match the term with its definition. -A line of credit secured by working capital assets

Match the term with its definition. -The interest rate charged by commercial banks on loans to their most creditworthy customers

Match the term with its definition. -Money loaned for a 5- to 10-year term, corresponding to the length of time the investment will bring in profits

The "five Cs of credit" are character, capacity, capital, conditions, and collateral.

Which of the following financing sources has the greatest advantage of speed?

Match the term with its definition. -Private individuals who invest in others' entrepreneurial ventures

Glenda is trying to decide between the use of debt and the use of equity to finance her young business. She should remember that

Barry needs financing to start his inner-city venture. His goal is to provide part-time employment for at-risk youths to keep them off the streets and engaged in learning marketable skills. Barry may find some assistance from

Match the definition with its term. -An SBA program that provides short-term loans of up to $50,000 to small businesses and not-for-profit child-care centers

When considering a loan application, which of the five Cs is vital even if not sufficient alone to secure a loan?

Penelope is planning to launch her first business. She will most likely acquire her initial financing from

Even though Evan's company is a corporation, the bank imposed a loan covenant that required Evan to

Allie is starting a purse business and is considering using a crowdfunding portal to raise money for her small business. In order to do so, what requirements must be met by Allie? What potential problems with crowdfunding should she be aware of before she undertakes such an endeavor?

A line of credit is the _____ amount of credit a bank will provide a borrower at any one time.

Match the term with its definition. -An informal agreement between a borrower and a bank as to the maximum amount of funds the bank will provide at any one time

If a firm finances with equity rather than with debt, it will bear no interest expense and thus yield greater net profits.

Common stock can be sold to underwriters, but they do not guarantee the sale of securities.

Small Business Administration loans include guaranty loans and loans directly from the SBA.

Harlan's customers have been a little slow in paying their invoices, and he is short on cash to pay his quarterly taxes. Harlan should consider