Business Planning and Financing Exam Preparation Guide
Course Introduction
Business Planning and Financing explores the essential processes involved in developing, evaluating, and implementing strategic business plans, with a strong focus on securing and managing financial resources. The course delves into the formulation of business models, market analysis, competitive strategy, and operational tactics, while examining various sources of funding such as venture capital, angel investors, loans, and crowdfunding. Students will learn how to construct detailed financial statements, assess the financial viability of a business idea, and communicate effectively with potential investors. Case studies and practical assignments equip learners with the skills necessary to create persuasive business plans and understand the complexities of financial management in both startup and established business contexts.
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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Page 2
Chapter 1: Introduction and Overview
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Sample Questions
Q1) Small high-technology firms are responsible for twice as many product innovations per employee and obtain more patents per sales dollar than large high-technology firms.
A)True
B)False
Answer: True
Q2) During a venture's rapid growth stage,funds for plant expansion,marketing expenditures,working capital,and product or service improvements is obtained through?
A)seed financing
B)second round financing
C)mezzanine financing
D)seasoned financing
E)liquidity stage financing
Answer: C
Q3) Free cash flows are adjusted for risk and the time value of money when used to calculate the value of a venture.
A)True
B)False
Answer: True
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Page 3
Chapter 2: From the Idea to the Business Plan
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Sample Questions
Q1) A written document that describes the proposed venture in terms of the product or service opportunity,current resources,and financial projections is called a:
A)financial plan
B)business plan
C)entrepreneurial plan
D)survival plan
Answer: B
Q2) A sound business model includes a plan to:
A)generate revenues,make profits
B)make profits,produce free cash flows
C)produce free cash flows for the owners of the venture
D)generate revenues,make profits,and produce free cash flows
Answer: D
Q3) The VOS Indicator is useful in assessing the commercial potential of a venture,but should not be used as the sole tool to determine a venture's fate.
A)True
B)False
Answer: True
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Chapter 3: Organizing and Financing a New Venture
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Sample Questions
Q1) Most trademarks take the form of names,words,or graphic designs.
A)True
B)False
Answer: True
Q2) Confidential disclosure agreements are used to protect intellectual property when disclosure must be made to an outside individual or organization.
A)True
B)False
Answer: True
Q3) The rules and procedures established to govern the corporation are called the
A)corporate charter
B)articles of incorporation
C)corporate bylaws
D)confidentiality disclosure agreements
E)partnership agreements
Answer: C
Q4) An idea is enough to be patented.
A)True
B)False
Answer: False
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Chapter 4: Measuring Financial Performance
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Sample Questions
Q1) Find the "contribution profit margin" based on the following information:cash fixed costs = $60,000;variable costs = $70,000;and sales = $100,000.
A)70%
B)60%
C)30%
D)40%
E)100%
Q2) Which of the following is a source of cash?
A)an increase in accounts receivable
B)a decrease in wages payable
C)the acquisition of land
D)an increasein the amount owed on a note payable
E)the repurchase of outstanding shares of stock
Q3) What is Acme's taxable income and tax expense?
A)$6,000;$2,040
B)$2,000;$1,320
C)$4,000;$1,360
D)$2,000;$680
E)$9,500;$3,230
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Chapter 5: Evaluating Financial Performance
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Sample Questions
Q1) Commercial banks are important users of financial ratios and measures during the development and startup stages of ventures.
A)True
B)False
Q2) The interest coverage ratio for Runs and Goses is:
A)6.5 times
B)4.5 times
C)9.7 times
D)3.5 times
E)1.5 times
Q3) Which of the following measures the average time from purchase of materials and labor to actual cash payment?
A)sale-to-cash conversion period
B)inventory-to-sale conversion period
C)purchase-to-payment conversion period
D)cash conversion cycle
Q4) Cross-sectional analysis is used to examine a venture's performance over time.
A)True
B)False
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Chapter 6: Financial Planning:short Term and Long Term
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Sample Questions
Q1) If a venture has a return on assets (ROA)= 12%,an equity multiplier based on beginning equity =3.0 times,and a sustainable growth rate of 18%,the retention rate would be:
A)10%
B)20%
C)30%
D)40%
E)50%
Q2) A cash budget shows a venture's projected revenues and expenses over a forecast period.
A)True
B)False
Q3) If a venture has a return on assets (ROA)= 10%,an equity multiplier based on beginning equity =3.5 times,and a retention rate = 50%,the sustainable growth rate would be:
A)10%
B)17.5%
C)35%
D)40%
E)20.5%
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Chapter 7: Types and Costs of Financial Capital
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Sample Questions
Q1) Liquidity premiums reflect the risk associated with firms that possess few liquid assets.
A)True
B)False
Q2) Organized exchanges have physical locations where trading takes place,while the over-the-counter market is comprised of a network of brokers and dealers that interact electronically.
A)True
B)False
Q3) Suppose the real risk free rate of interest is 4%,maturity risk premium is 2%,inflation premium is 6%,the default risk on similar debt is 3%,and the liquidity premium is 2%.What is the nominal interest rate on this venture's debt capital?
A)13%
B)14%
C)15%
D)16%
E)17%
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Chapter 8: Securities Law Considerations When Obtaining Venture Financing
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Sample Questions
Q1) The efforts to regulate the trading of securities takes place under which of the following securities laws?
A) Securities Act of 1933
B) state blue-sky laws
C) Securities and Exchange Act of 1934
D) Investment Company Act of 1940
E) Investment Advisers Act of 1940
Q2) The efforts to regulate the trading of securities takes place under which of the following securities laws?
A)Securities Act of 1933
B)state "blue-sky" laws
C)Securities and Exchange Act of 1934
D)Investment Company Act of 1940
E)Investment Advisers Act of 1940
Q3) Of the following,which is not true about Regulation A?
A)it is shorter and simpler than the full registration
B)it does not have limitations on the number or sophistication of offerees.
C)it is a public offering rather than a private placement
D)it can generally be freely sold
E)it requires no offering statement be filed with the SEC
Page 10
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Chapter 9: Valuing Early-Stage Ventures
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Sample Questions
Q1) The "reversion value" is the future value of the terminal value.
A)True
B)False
Q2) The pseudo dividend method treats surplus cash as a free cash flow to equity.
A)True
B)False
Q3) "Just in time" capital injections by equity investors is a reference to
A)sustainable growth
B)the present value of the terminal value
C)equity investors' providing money only when needed
D)dividend payout
Q4) Which one of the following components is not a component of the equity valuation cash flow calculation?
A)net income
B)depreciation and amortization expense
C)change in net operating working capital (without surplus cash)
D)capital expenditures
E)net equity repurchases
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Chapter 10: Venture Capital Valuation Methods
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Sample Questions
Q1) The return to venture investors directly depends on which of the following?
A)venture's ability to generate cash flows
B)ability to convince an acquirer to buy the firm
C)the amount ofits short-term liabilities
D)both a and b
E)all of the above
Q2) 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
Q3) In staged financing,the expected effect of future dilution is borne by both founders and the investors currently seeking to invest.
A)True
B)False
Q4) The venture capital valuation method which capitalizes earnings using a cap rate implied by a comparable ratio is known as direct capitalization.
A)True
B)False
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Chapter 11: Professional Venture Capital
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Sample Questions
Q1) SLOR stands for "standard letter of rejection."
A)True
B)False
Q2) When screening prospective new ventures,venture capital firms must consider the nature of the proposed industry.Which of the following is not part of the screening of the proposed industry?
A)market attractiveness
B)managerial references
C)potential size
D)technology
E)threat resistance
Q3) Pension funds are the dominant source of funds for venture investing.
A)True
B)False
Q4) The beginning of professional venture capitalists began with the formation of American Research and Development in 1966.
A)True
B)False
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Page 13
Chapter 12: Other Financing Alternatives
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Sample Questions
Q1) Because of loan restrictions,obtaining funding from commercial lenders is prohibitive for entrepreneurs.
A)True
B)False
Q2) In which of the following credit programs does the SBA borrow money to be lent Small Business Investment Companies (SBICs)and guarantees payment to investors?
A)7(a)loan
B)504 loan
C)microloan
D)venture capital loan
E)credit card loan
Q3) Which one of the following is not a current Small Business Administration (SBA)credit program?
A)7(a)loan
B)504 loan
C)microloan
D)venture capital loan
E)credit card loan
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14
Chapter 13: Security Structures and Determining Enterprise
Values
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Sample Questions
Q1) Which of the following is an example of a put option which is at the money?
A)The option to sell at $11,the stock is worth $12.
B)The option to buy at $13,the stock is worth $12.
C)The option to sell at $12,the stock is worth $12.
D)The option to sell at $13,the stock is worth $12.
E)The option to buy at $11,the stock is worth $12
Q2) An option is a right to buy or sell additional shares of stock.
A)True
B)False
Q3) If a share of preferred stock has a $10 par value,and the stock has a 2:1 conversion ratio,then the conversion price would be $5.
A)True
B)False
Q4) Which of the following is not a type of option?
A)call option
B)put option
C)warrant
D)LBO
Page 15
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Chapter 14: Harvesting the Business Venture Investment
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Sample Questions
Q1) If venture investors invest $1,000,000 now,will receive 25% of the exit value,and expect a 20% compounded rate of return on their investment,what is the approximate expected exit value at the end of five years?
A)$1,000,000
B)$2,490,000
C)$4,980,000
D)$7,470,000
E)$9,950,000
Q2) Which of the following is not a candidate for a leveraged buyout?
A)a venture with stable and adequate operating cash flows
B)a venture with a high amount of equity relative to debt
C)a venture with the ability to protect market share
D)a venture with a high debt ratio
Q3) Harvesting is the process of exiting the privately held business venture to unlock the owners' investment value.
A)True
B)False
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16
Chapter 15: Financially Troubled Ventures: Turnaround Opportunities
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Sample Questions
Q1) Which of the following provides that defaulting on one loan places all loans in default?
A)insolvency
B)loan default
C)acceleration provision
D)cross default provision
E)foreclosure
Q2) Which of the following is not a typical outcome of a Chapter 11 bankruptcy?
A)successful reorganization and the continuation of operations
B)liquidation under Chapter 7 bankruptcy legislation
C)a government bailout resulting in continued operations at the expense
Of operational independence from the government
D)merging the venture with another firm
E)a and b
F)c and d
Q3) Operations restructuring always involves growing a venture's revenues relative to its costs.
A)True
B)False
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