apex economics financing a business – Flashcards
Unlock all answers in this set
Unlock answersquestion
Seed capital pays for which of the following?
answer
Funding for research and development of a business idea
question
Startup capital pays for which of the following?
answer
Operating expenses for the first year of a new business
question
Which of the following best states the difference between seed capital and startup capital?
answer
Seed capital is for research and planning while startup capital is for operating expenses.
question
Match each type of financing with its source
answer
Venture capital: Group of investors; Angel investment: Wealthy individual; Business loan: Private bank.
question
Match each type of financing with the method used to obtain it.
answer
Debt financing: Taking a loan from a bank. Equity financing: Selling ownership in the company. Public offering: Selling shares of stock on the open market.
question
Match each type of financing with its purpose.
answer
Seed capital: Funding for research and development of a business idea; Angel investment: Funding to get a new business up and running; Venture capital: Investment to achieve high returns quickly
question
Which of the following is a disadvantage of debt financing?
answer
Banks are usually unwilling to fund a business in its early stages of development.
question
Which of the following best states one of the disadvantages of equity financing?
answer
Selling stock gives the shareholders some control over the company.
question
Which of the following is an advantage of equity financing over debt financing?
answer
It's possible to raise more money than a loan can usually provide.
question
Which of the following is generally not required to get a business loan from a bank?
answer
A wealthy startup investor
question
Which of the following best describes the purpose of angel capital?
answer
To fund companies at the startup stage of development
question
Which of the following best states the expectations of venture capitalists?
answer
Large returns in a short period of time
question
Which of the following enterprises would be most likely to attract an angel investor?
answer
A brand new database design company
question
Which of the following enterprises would be most likely to attract a venture capitalist?
answer
A one-year-old e-commerce company
question
Which of the following enterprises would be most likely to secure a large business loan?
answer
A well-established real-estate developer
question
Which of the following happens when a company goes public?
answer
It begins selling shares of stock in a public stock market
question
Which of the following accurately describes an initial public offering (IPO)?
answer
The first sale of stock to the public
question
Which of the following best describes the purpose of an initial public offering (IPO)?
answer
To raise money to fund a company's activities
question
Which of the following is one advantage for a company that goes public?
answer
Money is raised without going into debt
question
Which of the following is one disadvantage for a company that goes public?
answer
The pressure to make profits is increased.
question
Which of the following is one disadvantage for a company that goes public?
answer
The company faces more government regulations
question
Put the steps in chronological order that a company goes through to make an initial public offering.
answer
1. Disclosure documents are drawn up; 2. Paperwork is filed with the SEC; 3. Bankers recruit brokers to sell the stock; 4. Stock is sold to the public.
question
Put the steps in chronological order that a company goes through to make an initial public offering.
answer
1. The company's lawyers prepare to disclose the company's financial position; 2. The company files its prospectus with the Securities and Exchange Commission; 3. The company conducts an advertising campaign to hype the company to stock brokers; 4. The company's stock is sold to the public in a stock exchange.
question
Put the steps in chronological order that a company goes through to make an initial public offering.
answer
1. A prospectus is prepared; 2. The SEC is notified; 3. Investment bankers are recruited; 4. Stock is sold to the public.
question
Which of the following factors would be most likely to lead to an unsuccessful IPO?
answer
Bearish market conditions
question
Which of the following factors would be most likely to lead to a successful IPO?
answer
A history of good profits
question
Which of the following factors would be most likely to lead to an unsuccessful IPO?
answer
A history of debt
question
Which of the following does not help explain why the Google IPO was successful?
answer
Google's history of borrowing large sums of money
question
Which of the following does not help explain why 800.com canceled its IPO?
answer
It needed a lot of money to finance its operations.
question
Which of the following helps explain why Google's IPO was successful while 800.com's was not?
answer
The timing of Google's IPO was much better as investor confidence was higher
