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Exam 16: Sources of Equity Financing

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Question 31

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Some suggestions for maintaining family relationships and friendships when borrowing for a business are:

A) keep the arrangement strictly family.
B) borrow as much as you can.
C) an oral contract is as good as a written contract.
D) treat the money as "bridge financing."

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Question 32

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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.

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Question 33

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The first place entrepreneurs should look for startup money is from their family and friends.

________ are typically wealthy individuals or entrepreneurs themselves.

What is a "road show" and what is its purpose?

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

In a(n) ________,a company raises capital by selling shares of its stock to the general public for the first time.

A firm commitment agreement guarantees that the company will receive the required funds.

One of the things that underwriters look for in a company that wants to go public is:

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

Define and describe the importance of the following types of capital. ∙ fixed capital ∙ working capital ∙ growth capital

Venture capital companies are an important source of equity funding for small businesses.Discuss their policies,ownership,control,and investment preferences when it comes to funding small businesses.

Venture capital companies are private,for-profit organizations that purchase equity positions in young businesses they believe have high-growth and high-profit potential,producing annual returns of 300 to 500 percent over five to seven years.

Foreign corporations invest in U.S.small businesses through strategic partnerships in order to gain access to new technology,new products,and U.S.markets.

The primary advantage of equity capital is that it does not have to be repaid with interest.

The typical letter of intent prevents an underwriter from withdrawing a company's stock offering before it is executed.

The majority of venture capital firms that provide capital to small businesses strive to not be involved in running the business.

A highly possible source of funding for a start-up and early business is:

Lenders of fixed capital expect the assets purchased to increase the borrowing firm's efficiency,profitability,and cash flows.

The biggest benefit of going public is the capital infusion the company receives.