Entrepreneurial Finance
Pre-Test Questions
Course Introduction
Entrepreneurial Finance explores the fundamental principles and practical approaches to financing new business ventures, from idea inception to growth and exit strategies. The course examines sources of capital, including angel investors, venture capital, crowdfunding, and bootstrapping, while emphasizing key financial concepts such as valuation, deal structure, and risk assessment. Students will learn how to prepare financial statements, construct funding pitches, negotiate with investors, and manage cash flow to support business sustainability and expansion. Real-world case studies and interactive projects provide hands-on experience in navigating the challenges of securing and managing funds in dynamic startup environments.
Recommended Textbook
New Venture Creation Entrepreneurship for the 21st Century 9th Edition by Stephen Spinelli
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689 Verified Questions
689 Flashcards
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Chapter 1: The Global Entrepreneurial Revolution for a Flatter World
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Sample Questions
Q1) MIT researcher David Birch found that while new and growing smaller firms could be regionally important,they had little effect on the economy as a whole.
A)True
B)False
Answer: False
Q2) Entrepreneurship training works well in schools of business and engineering,but has not proven to be useful in fields such as architecture,medicine,and life sciences.
A)True
B)False
Answer: False
Q3) According to the text,which of the following is an important emerging field that is helping large population groups break out of poverty?
A) Philanthropy
B) Mentorship
C) Doctoral programs
D) Microcredit
Answer: D
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Page 3
Chapter 2: The Entrepreneurial Mind: Crafting a Personal
Entrepreneurial Strategy
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Sample Questions
Q1) Name the conceptual scheme for thinking about the self-assessment process where there are two sources of information about the self: the individual,and others.
Answer: The Johari Window.
Q2) In the context of entrepreneurship,the need for power is about achieving influence.
A)True
B)False
Answer: True
Q3) According to the authors,which of the seven dominant themes of entrepreneurship is the most important?
A) Leadership
B) Opportunity Obsession
C) Courage
D) Commitment and Determination
E) Tolerance of Risk,Ambiguity and Uncertainty
Answer: D
Q4) What plays a significant role in influencing an entrepreneur's values,motivations,attitudes,and behaviors?
Answer: Personal history
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Chapter 3: The Entrepreneurial Process
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Sample Questions
Q1) A good opportunity will exhibit which of the following?
A) Gaps in available information and knowledge
B) Inconsistencies in existing service and quality
C) High rates of change
D) All of the above
Answer: D
Q2) While government data,research,and business mortality statisticians may not agree on the precise failure and survival figures for new businesses,they do agree that moderate success is the rule,not the exception with new ventures.
A)True
B)False
Answer: False
Q3) "Durability" of an opportunity relates to:
A) Return on Investment
B) Market demand
C) Barriers to entry
D) All of the above
Answer: A
Q4) What are the three driving forces of the Timmons Model?
Answer: Team,Opportunity,Resources
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Chapter 4: Clean Commerce Is an Opportunity Sea Change
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Sample Questions
Q1) Systems thinking refers to the practice of tracking materials through their respective life cycles.
A)True
B)False
Q2) Which of the following is closely tied to molecular thinking?
A) Product functionality
B) Raw materials
C) Degradability
D) All of the above
Q3) Included in green chemistry tools is the idea of the ________,which would have manufacturers make as full use as possible of every input molecule in the final output product.
Q4) Sustainability embraces all but the following
A) Improving human health
B) Protecting ecological systems
C) Growth and profits
D) Sustainability embraces all of the above
Q5) ________ is a strategic approach to greening the inherent nature of new venture processes and products.
Q6) What is green chemistry? Page 6
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Page 7
Chapter 5: The Opportunity:
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Sample Questions
Q1) In a free enterprise system,opportunities are held up and prevented by such factors as changing circumstances,chaos,confusion,inconsistencies,and information gaps.
A)True
B)False
Q2) What minimum level of gross margin is characteristic of a superior opportunity?
Q3) Earnings before interest but after taxes (EBIAT)is driven by all the following except:
A) Liquidity
B) Profitability
C) Sales
D) Asset intensity
Q4) The vast majority of startup entrepreneurs spend inordinate amounts of time chasing inappropriate funding sources for their venture.
A)True
B)False
Q5) New ideas are the drivers of entrepreneurial success.
A)True
B)False
Q6) Success is highly situational and requires a substantial amount of ________.
Page 8
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Chapter 6: Screening Venture Opportunities
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Sample Questions
Q1) Which of the following is not an aspect of new venture success?
A) Failing quickly
B) Relieving pain
C) Discount pricing
D) All of the above are important aspects of new venture success.
Q2) The opportunity must be placed in the context of both a competitive environment and an existing ________ that the entrepreneur believes can be improved upon and altered in a way that creates value.
Q3) ________ refers to the gaps in an industry or market into which your opportunity falls.
Q4) Completing the Venture Opportunity Screening Exercise is designed to clear up the uncertainties and risks associated with that venture concept.
A)True
B)False
Q5) Saying no to lots of opportunities is strategy for increasing the odds of new venture success.
A)True B)False
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Chapter 7: Opportunities for Social Entrepreneurship
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Sample Questions
Q1) Corporate social responsibility (CSR),which emphasizes doing good and serving communities while still making a profit,provide good examples of hybrid models.
A)True
B)False
Q2) ________ provides value-added funding for nonprofit organizations to increase their potential for social impact.
Q3) The mission of a social entrepreneur is to ________.
Q4) In the early 1970s the notion of wicked problems emerged out of the complexity of resolving issues related to what?
A) Inflation
B) Oil shortages
C) Urban and governmental planning
D) All of the above
Q5) Wicked problems have no right or wrong solutions.
A)True
B)False
Q6) The primary difference between traditional entrepreneurship and social entrepreneurship is the __________.
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Chapter 8: The Business Plan
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Sample Questions
Q1) The right investor can make the difference between an average and a good or great venture.
A)True
B)False
Q2) When is it a good idea to hire an outside professional to write the business plan?
A) When time to market is a critical factor
B) When the lead entrepreneurs are deeply involved with other pursuits
C) It is not a good idea to hire an outside professional to write the business plan
D) When no one on the team is willing to take the lead in writing the document
Q3) What are three questions the team should ask after investors have had a chance to review the business plan?
Mentioned in the text: What have we missed? Where are we vulnerable? How would you knock us off? How would you modify our strategy? What would you do differently? What do you believe has to happen to make this highly successful?
Q4) During a business plan presentation,entrepreneurs can become so focused on selling the idea to the investors that they fail to ask great questions and do little serious
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11
Chapter 9: The Entrepreneurial Leader and the Team
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Sample Questions
Q1) Since investors often gauge their equity expectations on previous performance,even young entrepreneurs should strive to hold onto a significant equity stake in the business.
A)True
B)False
Q2) What are the five fundamental realities with nearly any new venture?
Q3) At what stage of entrepreneurial transition do conflicts between founders most often arise?
A) Planning
B) Doing
C) Leading
D) Leading Managers
Q4) In what stage of development are the critical mass of people,market and financial results,and competitive resiliency established?
A) Nascent
B) Startup
C) High-growth
D) Mature
Q5) In rapid-growth firms,power and control are _________ and leadership is
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Chapter 10: Ethical Decision Making and the Entrepreneur
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Sample Questions
Q1) Entire industries have developed their own codes of ethics as a way of heading off action by Congress.
A)True
B)False
Q2) What is the most widely used approach to ethical decision-making?
A) Aristotle's approach
B) Utilitarianism
C) Deontology
D) None of the above
Q3) Broken partnerships can often be traced to differences in personal ethics among the members of the management team.
A)True
B)False
Q4) In an attempt to connect with business managers in a way that reflects the real world,business ethicists talk of moderation,pragmatism and minimalism.
A)True
B)False
Q5) How does the concept known as 'the fog of war' relate to ethical behavior and the entrepreneurial experience?
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Chapter 11: Resource Requirements
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Sample Questions
Q1) How can lack of money,employees,equipment and such actually work to the advantage of the start-up entrepreneur?
Q2) Building a company by minimizing resources is referred to in colloquial terms as
Q3) Effective entrepreneurs set aside time for purely random activities-things done with no specific problem in mind.
A)True
B)False
Q4) Courts have held that even if a director can prove that he or she acted in good faith,that director can still be held personally responsible for the actions of officers.
A)True
B)False
Q5) Which of the following is not recommended as part of a productive board of directors?
A) A compensation committee
B) An audit committee
C) An executive committee
D) All are recommended
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Chapter 12: Franchising
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Sample Questions
Q1) The service delivery system is the basis for a franchise venture's competitive advantage.
A)True
B)False
Q2) Franchisor field support can be used to determine the stability and strength of the organization.
A)True B)False
Q3) In franchising,the ________ is the concept innovator who grows by seeking others to operate the concept in local markets.
Q4) The road map for marshalling resources for the franchise comes from establishing the ________.
Q5) Franchising offers a thoughtful system for reshaping and executing a delivery system designed to extract maximum ________ from the opportunity.
Q6) The smart franchise uses the ever-growing system of franchisees and company outlets to continuously gather ________.
Q7) Growth and ________ are the essence of the franchise mentality.
Q8) What are the three major profiles used to define the primary target audience?
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Chapter 13: Entrepreneurial Finance
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Sample Questions
Q1) What are the three core principles of entrepreneurial finance?
Q2) All the underlying characteristics and assumptions used by popular financial theories and models do not hold up for start-ups,and even up to an IPO.
A)True
B)False
Q3) For lending purposes,commercial banks generally regard subordinated debt as what?
A) Equity
B) Debt
C) Collateral
D) Depends on the deal structure
Q4) An existing business seeking expansion capital or funds for temporary use has a much easier job obtaining a combination of debt and equity.
A)True
B)False
Q5) What funding structure provides a sound financial foundation for growth without excessive dilution of an entrepreneur's equity?
Q6) How is the increase in net total operating capital calculated?
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Chapter 14: Obtaining Venture and Growth Capital
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Sample Questions
Q1) John Savage was an engineer with an idea for a flexible solar-energy material that would have a wide-range of military and civilian apparel applications.He estimates that he will need approximately $300,000 to develop a prototype.Friends and family could provide about $75,000.What would be the best source for the balance?
A) Informal investors
B) Venture capitalists
C) A strategic partnership
D) An SBA loan
Q2) An ESOP is a program in which the employees create an internal source of funding by becoming investors in the company.
A)True
B)False
Q3) Mezzanine is a debt instrument that does not require regular interest payments. A)True
B)False
Q4) Private placements are used for firms that are not in a position to pursue an IPO.
A)True
B)False
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Chapter 15: The Deal: Valuation, structure, and Negotiation
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Sample Questions
Q1) Venture capitalists may dilute a founder's equity with each additional round of capital,but they are not permitted to fire them.
A)True
B)False
Q2) How long is the typical expected holding period for a second stage venture capital investment?
A) 3-5 years
B) 4-7 years
C) 5-10 years
D) More than 10 years
Q3) In the venture capital valuation method,terminal value is found by multiplying net income and the P/E ratio.
A)True
B)False
Q4) Staged capital commitments favor the equity position of the A) Investor
B) Entrepreneur
C) Underwriters
D) Depends on the deal
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Chapter 16: Obtaining Debt Capital
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Sample Questions
Q1) The primary reason banks are lower-risk lenders is because that profile is consistent with their management style.
A)True B)False
Q2) Unlike equity investors,banks place very little weight on the quality of the management team.
A)True B)False
Q3) A bank's financing of installment note receivables is a non-recourse contract with the seller.
A)True
B)False
Q4) Time-sales financing is a way for a seller to generate cash from a long-term installment accounts receivable.
A)True B)False
Q5) In a standard factoring arrangement,the factor buys the client's receivables outright,without ________,as soon as the client creates them,by shipment of goods to customers.
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Chapter 17: Leading Rapid Growth, crises, and Recovery
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Q1) In rapid growth situations where cash burn rates are racing ahead of collections,what measures need to be in place to avoid chaos and possible collapse?
Q2) In the ________ approach,the manager is seen as willing to relinquish his or her priorities and power in the interests of an overall goal,and the appropriate people are included in setting cross-functional or cross-departmental goals and in making decisions.
Q3) What three areas does a turnaround specialist examine?
Q4) ________ is not as liquid as receivables but still can be liquidated to generate quick cash.
Q5) Explain how having a turnaround plan in place can help a troubled company.
Q6) Bankruptcy law defines the priority of creditors' claims when the firm is liquidated. A)True B)False
Q7) Describe the decline in morale at a troubled company.
Q8) Many emerging businesses have no standard costs against which they can compare the actual costs of manufacturing products.The result is they have no variance reporting,and therefore will know only after the fact how ________ a product is.
Page 20
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Chapter 18: The Family As Entrepreneur
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Q1) Which of the following is the most important aspect of building a successful family enterprise?
A) Financial expertise
B) Communication
C) Mentoring
D) Long-term planning
Q2) Define 'enterprising'.
Q3) On what should an enterprising family's strategic thinking and planning be based?
Q4) List five examples of relationship capital.
Q5) Define 'transgenerational entrepreneurship'.
Q6) What are the six dimensions for family enterprising?
Q7) Allocations from family investment funds are usually non-operating investments in businesses and do not represent a significant portion of the family's total wealth.
A)True
B)False
Q8) Which aspect of the Timmons Model is of particular significance with regard to family enterprising?
Page 21
Q9) Discuss why a financial mindset is more effective than an operational mindset.
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Chapter 19: The Harvest and Beyond
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Q1) When entrepreneurs sell their venture in a stock-for-stock exchange,the agreement typically includes protections against a sudden drop in the share price of the acquiring company.
A)True
B)False
Q2) What is the most common challenge with a management buyout?
A) Capital
B) Expertise
C) Legal structure
D) Depends on the industry
Q3) What are the three core aspects of shaping a harvest strategy?
Q4) Which harvest option can have the negative attribute of forcing the leadership team to focus on short-term profits and performance results?
A) MBO
B) ESOP
C) IPO
D) Strategic Alliance
Q5) ________ are harvest vehicles through which founders can realize some liquidity from their stock by sales to the plan and other employees.
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