Business Development and Growth Financing
Pre-Test Questions
Course Introduction
This course explores the strategic processes involved in growing a business, with a particular focus on identifying opportunities for expansion and securing the financial resources necessary to support scaling efforts. Students will examine various business development strategies, including market entry, partnerships, and innovation, while also learning about diverse financing options such as venture capital, private equity, angel investing, crowdfunding, and traditional lending. Through case studies and practical assignments, the course fosters the ability to assess growth potential, prepare compelling business proposals, and navigate the challenges of raising and managing capital in dynamic market environments.
Recommended Textbook
Entrepreneurial Finance 4th Edition by J.
Chris Leach
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15 Chapters
1018 Verified Questions
1018 Flashcards
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Chapter 1: Introduction and Overview
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Sample Questions
Q1) Business angels are wealthy individuals acting as informal or private investors,who provide venture financing for small businesses.
A)True
B)False
Answer: True
Q2) Which is not a major source of start-up financing for a venture's startup stage?
A)entrepreneur's assets
B)business operations
C)family and friends
D)business angels
E)venture capitalists
Answer: B
Q3) Successful entrepreneurs exhibit which of the following traits?
A)recognize and seize commercial opportunities
B)economic pessimism
C)tend to be doggedly optimistic
D)both a and b
E)both a and c
Answer: E
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Page 3
Chapter 2: From the Idea to the Business Plan
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Sample Questions
Q1) One way to describe asset intensity is the dollar investment in assets needed to generate a dollar in sales.
A)True
B)False
Answer: True
Q2) Which one of the following components is not a standard component of a sound business model?
A)produce low-cost products
B)generate revenues
C)make profits
D)produce free cash flows
Answer: A
Q3) The process of moving from entrepreneurial opportunities to new businesses,products,or services begins with ideas,then moves to the preparation of a business plan,and finally ends with a feasibility study.
A)True
B)False
Answer: False
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Chapter 3: Organizing and Financing a New Venture
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79 Flashcards
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Sample Questions
Q1) Based on 2009 tax schedules,the highest marginal tax rate on corporate taxable income is:
A)25.0%
B)28.0%
C)35.0%
D)38.0%
E)39.0%
Answer: E
Q2) Professional corporations (PCs)and service corporations (SCs)are corporate structures that "states" provide for professionals such as physicians,dentists,lawyers,and accountants.
A)True
B)False
Answer: True
Q3) "Business method" patents protect a specific way of doing business and the underlying computer codes,programs,and technology.
A)True
B)False Answer: True
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Chapter 4: Measuring Financial Performance
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Sample Questions
Q1) A firm's net operating profit after taxes (NOPAT)is calculated as:
A)net profit
B)EBIT times one minus the tax rate
C)EBT minus interest paid
D)EBIT times the tax rate
Q2) Determine the total operating fixed costs (TOFC)based on the following: Administrative expenses = $200,000;Marketing expenses = $180,000;Depreciation expenses = $100,000;and Interest expenses = $20,000.
A)$200,000
B)$380,000
C)$400,000
D)$480,000
E)$500,000
Q3) Assets are financial and physical items controlled or owned by the business.
A)True
B)False
Q4) On the balance sheet,Total Liabilities = Total Assets - Owners Equity.
A)True
B)False
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Chapter 5: Evaluating Financial Performance
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Sample Questions
Q1) Based on the following information,determine the venture's inventory-to-sale conversion period: cash conversion cycle = 250 days;sale-to-cash conversion period = 60 days;and purchase-to-payment conversion period = 70 days.
A)70 days
B)140 days
C)240 days
D)260 days
E)330 days
Q2) The term "cash build" is measured as:
A)net income plus depreciation
B)net sales minus expenses minus (plus)an increase (decrease)in inventories
C)net sales minus (plus)an increase (decrease)in receivables
D)net income plus depreciation minus (plus)an increase (decrease)in payables
Q3) The equity multiplier shows the extent by which assets are supported by equity and debt.
A)True
B)False
Q4) Trend analysis is used to examine a venture's performance over time. A)True B)False
Page 7
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Chapter 6: Financial Planning:short Term and Long Term
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Sample Questions
Q1) The financial funds needed to acquire assets necessary to support a firm's sales growth is called:
A)spontaneously generated funds
B)additional funds needed
C)addition in retained earnings
D)financial capital needed
Q2) "Public or seasoned financing" typically occurs during the survival stage of a venture's life cycle.
A)True
B)False
Q3) A firm has net income of $320,000 on sales of $3,200,000.Its assets total $2,000,000;the equity at the beginning of the year was $1,600,000 and dividends paid were $80,000.What is the sustainable growth rate?
A)5%
B)15%
C)6.25%
D)4.69%
E)none of the above
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8
Chapter 7: Types and Costs of Financial Capital
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Sample Questions
Q1) The accounting emphasis on accrued revenue and expenses and depreciation is the same emphasis as that of finance managers.
A)True
B)False
Q2) Which of the following is an example of rent on financial capital?
A)interest on debt
B)dividends on stock
C)collateral on equity
D)a and b
E)a,b,and c
Q3) Market cap is determined by multiplying a firm's current stock price by the number of shares outstanding.
A)True
B)False
Q4) A nominal interest rate is an observed or stated interest rate.
A)True
B)False
Q5) Typically,the stocks of closely held corporations aren't publicly traded.
A)True
B)False
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Chapter 8: Securities Law Considerations When Obtaining Venture Financing
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Sample Questions
Q1) Investor liability is "unlimited" under which of the following types of business organizational forms?
A)proprietorship
B)limited liability company (LLC)
C)corporation
D)S corporation
E)S limited liability company (SLLC)
Q2) Offerings and sales of securities are regulated under the Securities Act of 1933 and state blue-sky laws.
A)True
B)False
Q3) The returning of all funds to equity investors as a common "remedy" for a "fouled up" securities offering is called:
A)just action
B)fraud
C)second round financing
D)a rescission
E)mezzanine financing
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Chapter 9: Valuing Early-Stage Ventures
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Sample Questions
Q1) A "post-money" valuation differs from a "pre-money" valuation by the cost of financial capital.
A)True
B)False
Q2) The maximum dividend method is
A)the cleanest for valuing assets,but creates problems valuing surplus cash
B)the cleanest for valuation purposes but its dividend-laden financial statements can dramatically understate the firm's cash position
C)the cleanest for cash planning,but creates problems valuing the venture by discounting the dividends
D)calculated by directly discounting the cash flow statement's projected dividend flow to investors,but ignores risks associated with periodic gluts of surplus cash
Q3) The valuation approach involving discounting present value cash flows for risk and delay is called discounted cash flow (DCF).
A)True
B)False
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11
Chapter 10: Venture Capital Valuation Methods
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Sample Questions
Q1) Venture investors returns depend on the venture's ability to generate cash flows or to find an acquirer for the venture.
A)True
B)False
Q2) For the typical venture investing project,the valuation will be highest under:
A)DDA
B)PDM and MDM
C)VCSC
D)initial book value of equity
Q3) Staged financing is financing provided in sequences of rounds rather than all at one time.
A)True
B)False
Q4) The utopia discount process allows the venture investors to value their investment using only the business plan's explicit forecasts,discounting it at a bank loan interest factor.
A)True
B)False
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Page 12
Chapter 11: Professional Venture Capital
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Sample Questions
Q1) The term "capital call" refers to the flow of business plans and term sheets involved in the venture capital investing process.
A)True
B)False
Q2) The summary of the investment terms and conditions accompanying an investment proposed by the venture capitalist is known as the statement of strengths and weaknesses.
A)True
B)False
Q3) Endowments and foundations are more important suppliers of venture capital relative to individuals and families.
A)True
B)False
Q4) After a new professional venture capital fund is organized,the fund managers:
A)conduct due diligence and actively invest
B)solicit investments and obtain commitments
C)arrange harvest or liquidation
D)identify prospective venture investments and then solicit investments
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Chapter 12: Other Financing Alternatives
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Sample Questions
Q1) Despite the high risk and costs of using a facilitator or up-front fee solicitor to obtain financing,many start-ups never-the-less seek them as a source of funds due to the length of time it takes to raise new funds.
A)True
B)False
Q2) Arranging for partial ownership as a component of the expected return to a lessor is known as:
A)venture leasing
B)capital leasing
C)investment leasing
D)none of the above
Q3) Collateral plays an important role in determining the willingness to lend and the amount and terms of the loan,making it the most important factor in the lending process.
A)True
B)False
Q4) The 7(a)loan traditionally has been the SBA's primary loan program
A)True
B)False
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Chapter 13: Security Structures and Determining Enterprise
Values
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Sample Questions
Q1) Which of the following stock can be structured to assure the shareholder that they will share in the payment of any dividends to common stockholders?
A)paid in kind preferred stock
B)cumulative preferred stock
C)participating preferred stock
D)convertible preferred stock
E)non-cumulative preferred stock
Q2) The enterprise method of valuation can be executed with either an after-tax or before-tax weighted cost of capital as long as the rate is applied to the appropriate enterprise cash flows.
A)True
B)False
Q3) An option that can be exercised at any time until its expiration is called a:
A)forward contract
B)lookback option
C)American-style option
D)European-style option
E)Bermuda-style option
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Chapter 14: Harvesting the Business Venture Investment
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Sample Questions
Q1) When harvesting a venture,the methodical distribution of assets directly to the owners is known as a systematic liquidation.
A)True
B)False
Q2) A venture is expected to have an exit value of $10,000,000 five years from now.If venture investors invest $1,000,000 now,and expect a 20% compounded rate of return on their investment,what portion of the exit value would they need?
A)10.5%
B)20.1%
C)24.9%
D)28.8%
E)32.5%
Q3) In the aftermarket trading for the venture's securities,an order that converts to a market order once a certain price is achieved is known as a:
A)put order
B)market order
C)limit order
D)stop order
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Chapter 15: Financially Troubled Ventures: Turnaround Opportunities
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Sample Questions
Q1) During the development stage of a venture's life cycle,which of the following is not a basis for operating or financial decisions?
A)screening business ideas
B)preparing the business plan
C)obtaining seed financing
D)managing the ongoing operations
Q2) A "cross default provision" and an "acceleration provision" both cause principal obligations on a loan to become immediately due.
A)True
B)False
Q3) Which of the following refers to the failure to meet loan interest or principal payments when due?
A)insolvency
B)loan default
C)acceleration provision
D)cross default provision
E)foreclosure
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Page 17