BUS 402 WK 7 Quiz 7 Chapter 14Purchase this tutorial here:

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

A) $3 million

B) $500,000

C) $1 million

D) $750,000

2) Unlike entrepreneurs of the past, today's entrepreneurs:

A) are finding more government interest and funding for business start-ups than ever before.

B) find fewer closed doors as small business start-ups have become less risky.

C) have to piece their capital together from several sources.

D) are spending nearly 75% of their time raising capital.

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

A) Debt

B) Equity

C) Capital

D) Capacity

4) Tien is looking for capital to purchase new buildings and equipment for her small manufacturing company. Tien is looking for ________ capital.

A) Working

B) Fixed

C) Growth

D) Asset-based

5) ________ capital is the pool of temporary funds of the business used to support the normal operation of the business on a short-term basis.

A) Growth

B) Fixed

C) Equity

D) Working

6) The money Bert uses to build inventory for the upcoming Christmas season would be classified as ________ capital.

A) growth

B) working

C) fixed

D) efficiency

7) ________ financing includes the personal investment of the owners and is often called "risk capital."

A) Equity

B) Asset-based

C) Debt

D) Growth

8) The most common source of equity funds used to start a small business is:

A) private investors or "angels."

B) loans from commercial banks.

C) the entrepreneur's pool of personal savings.

D) public stock issues.

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

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.

10) When receiving investment money from friends and relatives entrepreneurs should:

A) use a clear verbal contract to ensure no misunderstandings.

B) only borrow from close friends and relatives who won't cause them trouble.

C) discuss all the details of the investment up front.

D) not borrow more than 30% of the necessary capital from them.

11) A disadvantage of using friends and relatives as investors is:

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.

12) Private investors, or "angels," are often:

A) wealthy individuals.

B) entrepreneurs.

C) persons who invest in business startups in exchange for equity stakes in the companies.

D) All of the above

13) The largest single source of external equity capital for small businesses is:

A) angels.

B) venture capitalists.

C) Small Business Administration loans.

D) commercial bankers.

14) Most "angel" investments:

A) are for growth or fixed capital.

B) are for between $10,000 and $2,000,000.

C) come from international or foreign investors.

D) are seeking a high and quick return on their investment.

15) "Angels":

A) are hard investors to please. Nearly 70% are dissatisfied with their investment.

B) tend to be easy to get money from as they accept nearly 60% of the opportunities presented.

C) have an average of $150,000 invested in 3.5 firms at any given time.

D) only finance deals requiring over $1 million in capital.

16) When looking for an angel, the key is:

A) networking.

B) using the SBA as a contact point.

C) searching the web.

D) using business incubators' computer matching services.

17) When structuring a deal with an "angel," an entrepreneur should remember that:

A) "angels" tend to prefer a controlling interest in the business.

B) the deal needs an annual return of 60—75%.

C) "angel" money is patient, often waiting seven or more years to cash out.

D) they prefer to earn their returns through dividends and interest.

18) Private "angel" investors tend to:

A) take 80% ownership by the time the company goes public.

B) provide seed money and less than $500,000.

C) look for returns of 60—75%.

D) only finance projects within their local area or region.

19) One important intangible yet highly important advantage an investment from a large corporate partner gives a start-up is:

A) credibility.

B) success.

C) power.

D) None of the above

20) 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.

A) commercial bank

B) venture capital company

C) "angel"

D) SB-1 filing

21) Most venture capitalists purchase ownership in a small business through:

A) a common stock or convertible preferred stock.

B) an ESOP.

C) loans with an option to buy stock.

D) a general partnership.

22) The two factors that make a deal attractive to venture capitalists are:

A) effective marketing strategies and networking opportunities.

B) high returns and a convenient (and profitable) exit strategy.

C) high returns and networking opportunities.

D) a convenient and (profitable) exit strategy and effective marketing strategies.

23) Venture capitalists look for all of the following except:

A) competent management.

B) industry stagnation.

C) viable exit strategy

D) competitive edge

24) Venture capitalists look for ________ as the most important ingredient in the success of any business.

A) innovation

B) a growth industry

C) a competitive edge

D) competent management

25) When taking a company public, investment bankers look for:

A) a leading position in a stable market.

B) 3 to 5 years of audited financial statements.

C) a strong record of revenues.

D) a moderate growth rate.

26) One of the biggest advantages of going public is:

A) the ability to attract low cost equity funding.

B) the ability to retain control while gaining maximum funding.

C) better employee morale and productivity.

D) enhanced credibility and improved corporate image.

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

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.

28) The largest cost in a public stock offering is:

A) printing expenses.

B) filing fees with the SEC.

C) the underwriter's commission.

D) legal fees.

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

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.

30) In a public offering, the underwriter:

A) advises the owner as to the best structure of the business going into the sale.

B) serves as an adviser and consultant to the small business in preparing the registration statement for the SEC.

C) is bound to the offering until it is executed.

D) is listed as one of the officers of the company.

31) The document outlining the details of the agreement between the entrepreneur and the stock underwriter is called:

A) Regulation D.

B) a filing.

C) the letter of intent.

D) the registration statement.

32) Under a ________ agreement, the underwriter agrees to purchase all of the shares in a company's public offering and then resells them to investors.

A) best effort

B) lock-up

C) final price

D) firm commitment

33) To ensure an "aftermarket" for a company's stock, most underwriters prefer to offer a minimum of ________ shares.

A) 10,000 to 20,000

B) 100,000 to 150,000

C) 400,000 to 500,000

D) 1,000,000 to 1,500,000

34) A lock-up agreement:

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.

35) When filing with the SEC, the initial registration statement:

A) prohibits a "road show."

B) is filed without share price, proceeds, or commissions listed.

C) signals the time to sign the formal underwriting agreement.

D) is generally accepted without corrections by the SEC.

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

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.

37) The formal underwriting agreement is signed:

A) on the last day before the registration statement becomes effective.

B) when the statement of registration is filed.

C) during the road show.

D) at the time of the letter of intent.

38) It typically takes ________ to take a company public.

A) 30 days

B) one year

C) 60 to 180 days

D) two weeks

39) ________ governs private placements and is designed to reduce the registration requirements for small companies going public.

A) Regulation D

B) Form SB

C) Form S-1

D) Regulation A

40) Regulation D:

A) is a simplified registration process designed to make it easier for small companies to make public stock offerings but it is more expensive than an S-1 filing.

B) has a capital ceiling of $10 million, and the price of each share must be at least $25.

C) filing uses a standardized disclosure statement in a question-and-answer format.

D) can be accomplished without a professional broker or securities firm.

41) The outstanding publicly held stock is also called:

A) the public float.

B) equity stock.

C) preferred stock.

D) available float.

42) Which of the following is the most popular rule of Regulation D exemptions?

A) 501

B) 502

C) 503

D) 504

43) Most companies that make Rule 5 offerings raise between $1 million and:

A) $50 million.

B) $10 million.

C) $5 million.

D) $20 million.

44) To qualify for a Rule 147 Intrastate public stock offering, a company must:

A) be a limited partnership.

B) file an SB-1 with the SEC 60 days before the offering.

C) derive 60% of its revenues in the state in which it makes this offering.

D) use 80% of the offering proceeds for business in the state in which it makes this offering.

45) A foreign stock market that caters to small companies is:

A) AIM.

B) AMX.

C) the NASDAQ.

D) DPOX.

46) Typically, ________ is needed to purchase the business's permanent or fixed assets.

A) Working Capital

B) Growth Capital

C) Fixed Capital

D) None of the above

47) Working capital can be calculated by:

A) Current Asset - Current Liabilities.

B) Total Asset - Current Liabilities.

C) Total Liabilities - Total Asset.

D) Total Asset - Total Liabilities.

48) Equity capital is also called:

A) equity money.

B) stock money.

C) risk capital.

D) None of the above

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