MGT 241 Midterm Ch. 8 – Flashcards

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Use of debt to finance a new venture involves a payback of funds plus an interest fee for the use of the money.
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True
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The most common sources of debt financing are commercial banks.
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True
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Sources of debt financing include trade credit, accounts receivables, factoring, and finance companies.
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True
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Equity financing is money invested in the venture with legal obligations to repay the principal amount of interest or interest rate on it.
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False
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Public offering is a term used to refer to corporations taking public donations to raise capital.
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False
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Because the advantages of going public outweigh the disadvantages, it is in a corporation's best interest to go public.
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False
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History and nature of the company, capital structure, and description of any material contracts are just a few examples of the specific detailed information that must be presented about a firm that is going public.
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True
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Private placement is a method of raising capital through the private placement of securities.
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True
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Regulation D augments the regulations for reports and statements required for selling stock to private parties, friends, employees, customers, relatives, local professionals.
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False
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Sophisticated investors are wealthy individuals who invest more or less regularly in new and/or early- and late-stage ventures.
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True
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Venture capitalists are a valuable source of equity funding for new ventures.
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True
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The venture capital pool is rapidly declining due to overfunding.
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False
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Venture capitalists are quick to invest.
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False
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Venture capitalists, surprisingly, require little information before they make an investment.
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False
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The business plan is a critical element in a new-venture proposal.
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True
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There is no way for the venture capitalist adequately to evaluate a new venture.
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False
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The average size of a social loan is around $7,000.
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True
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Social lending sites are different from so-called microlending sites.
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True
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A potential danger of social lending is the implication that social loans may be viewed as gifts and taxed accordingly.
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True
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Venture capital firms want to own control of the firms in which they invest.
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False
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Venture capitalists are usually satisfied with a reasonable return on investments.
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False
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Venture capitalists are slow to invest.
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True
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Venture capitalists need only basic summary information before they make funding decisions.
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False
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One of the most frequently used criterion in evaluating new ventures, is the ability of the entrepreneur to sustain intense effort.
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True
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There is only a small number of informal risk capitalists in the market today.
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False
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Informal risk capitalists are those who have already made their money and now seek to help new ventures.
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True
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Informal risk capitalists are often referred to as "business angels."
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True
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Entrepreneurs are rarely able to set up a business without investment funds or bank loans.
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False
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Frugality is deemed a bootstrapping technique.
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True
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Most venture capital funds later stages of venture development, not the start-up (or seed) stage.
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False
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At start-up time, forms of financing includes all but which of the following?
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equitable payback
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Which of the following is (are) sources of capital for entrepreneurs?
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equity
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Many new ventures find that debt financing is
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necessary.
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Approximately how many commercial banks are there in this country?
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about 7,000
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Which of the following is not a question commonly asked by banks of entrepreneurs?
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What interest rate did you have in mind?
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When starting a business, which of the following sources of financing are least likely to be used?
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insurance companies
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When starting a business, which of the following sources of financing are most likely to be used?
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trade credit
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Which of the following would be most commonly used for short-term financing?
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trade credit
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Which of the following would be most commonly used for medium-term financing?
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finance companies
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Which of the following would be most commonly used for long-term financing?
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insurance companies
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When accounts receivable are bought from a company for capital funding it is called
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factoring.
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Which of the following is not a type of debt financing?
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private placement
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A disadvantage of debt financing is
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regular interest payments.
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Short-term debt is
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paid back in one year.
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Which of the following is a type of equity financing?
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common stock
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The most common source of debt financing is
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commercial banks.
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Advantages of debt financing include all of the following except:
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regular interest payments.
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Long-term debt is used for
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both a and b.
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When securing a bank loan an entrepreneur should be prepared to answer which of the following questions except?
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What is the price of your product?
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SEC stands for the
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Securities and Exchange Commission.
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When going public with public offerings an advantage might be
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size of the company's capital amount.
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SBIC stands for the
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small-business investment companies
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Equity capital is
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not a loan but a form of stock.
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Evaluation of new-venture proposals includes all the following processes except
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a product prototype
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One of the advantages of public offerings is
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liquidity.
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__________ is(are) one of the disadvantages of going public.
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Shareholder pressure
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The Regulation D exemptions include all of the following except:
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placements in excess of $l0 million.
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The main objective of Regulation D is to
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make it easier and less expensive for small ventures to sell stock.
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Which of the following is not one of the most common questions typically required to be answered by entrepreneurs seeking funding?
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What exact date will you repay the money?
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Equity capital is often raised through:
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public stock offerings.
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When going public specific detailed information that must be presented includes
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the capital structure of the company.
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Regulation D defines separate exemptions that are based on the amount of money being raised. Which is not a rule that accompanies these exemptions?
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rule 503
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Of the following, which is not typically identified as a bootstrapping technique?
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hiring seasoned veterans
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Venture capitalists are experienced professionals who provide a full range of service for new ventures including
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management consulting.
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Major trends in the venture capital field today include all of the following except
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less specialized and more homogenous funds
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Which of the following terms is not synonymous with social lending?
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commercially viable lending
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Of the following, which is more likely than the others to be deemed a potential danger of social lending?
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business plan disclosure
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Which of the following statements is not true of venture capitalists?
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They are interested in trying to manage firms themselves.
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Criteria that venture capitalists use in evaluating new venture proposals include:
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the characteristics of the product or service.
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Venture proposals are often rejected due to significant deficiencies in
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both a and b.
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Which is not a stage of the evaluation process?
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evaluation of the business plan
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Which is an important question for the entrepreneur to ask when evaluating the venture capitalist?
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Is the person someone with whom the entrepreneur can work?
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The entrepreneur should ask the venture capitalist questions.
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an unlimited number of
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Which is one of the most important questions for entrepreneurs to ask regarding venture capitalists?
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What is it like to work with their firm?
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Which of the following is a true statement about raising capital?
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It often takes a great deal of time to raise capital.
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How many people in America have net worth in excess of $1 million?
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about 500,000
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How do informal investors find projects to invest in?
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networks of friends
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An informal risk capitalist is referred to as:
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a business angel.
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Informal investors find projects through
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a network of friends.
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Which of the following does not represent a category of angel investors?
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amateur angels
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