Entrepreneurial Finance Review
Questions
Course Introduction
Entrepreneurial Finance explores the financial strategies and tools essential for launching and growing new ventures. This course covers topics such as opportunity recognition, financial planning, sources of funding, valuation, capitalization structures, and risk management. Students learn how to attract and negotiate with investors, analyze financial statements, forecast cash flows, and make informed financial decisions under uncertainty. Through case studies and real-world applications, students develop the skills needed to secure and effectively manage capital, supporting the long-term success of entrepreneurial initiatives.
Recommended Textbook
Entrepreneurial Finance 5th Edition by J.
Chris Leach
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16 Chapters
1061 Verified Questions
1061 Flashcards
Source URL: https://quizplus.com/study-set/3606 Page 2
Chapter 1: Introduction to Finance for Entrepreneurs
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91 Verified Questions
91 Flashcards
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Sample Questions
Q1) Which one of the following possible conflicts of interest is usually minimized through the use of equity incentives?
A)owner-manager conflicts
B)owner-employee conflicts
C)manager-employee conflicts
D)manager-debtholder conflicts
Answer: A
Q2) Studies by Phillips and Kirchhoff,and by Headd,found that about 38%-40% of new firms survived six years of operation.
A)True
B)False
Answer: True
Q3) Harry Dent documented major generation waves in the United States during the twentieth century in:
A)1972
B)1982
C)1993
D)2003
Answer: C
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Page 3
Chapter 2: Developing the Business Idea
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) An average score on using the VOS Indicator<sub>?</sub><sup>TM </sup>would fall in the range:
A)0.00-0.99
B)1.00-1.66
C)1.67-2.33
D)2.34-3.00
Answer: C
Q2) Once conceptualized,a new idea should be examined for its business feasibility.
A)True
B)False
Answer: True
Q3) A well-designed entrepreneurial venture bins with an idea that survives an analysis of its feasibility and results in a business model/plan.
A)True
B)False
Answer: True
Q4) A venture with a low score on the VOS Indicator should always be abandoned.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Organizing and Financing a New Venture
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) Patents that cover most inventions pertaining to new products,services,and processes,are referred to as:
A)design patents
B)plant patents
C)utility patents
D)electrical patents
E)mechanical patents
Answer: C
Q2) Intellectual property can be protected by all of the following except:
A)patents
B)trademarks
C)legal disclaimers
D)copyrights
E)trade secrets
Answer: C
Q3) The highest marginal income tax rate for taxable personal income is 45 percent.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Preparing and Using Financial Statements
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68 Verified Questions
68 Flashcards
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Sample Questions
Q1) Net cash burn occurs when the sum of cash flows from operations and investing is positive.
A)True
B)False
Q2) Amounts owed to another for purchase made on credit which come due in less than one year are known as receivables.
A)True
B)False
Q3) Find the "survival revenues" (SR),also known as the EBDAT breakeven)based on the following information:cash fixed costs = $60,000; variable costs = $70,000; and sales = $100,000.
A)$85,714
B)$100,000
C)$116,667
D)$200,000
E)$300,000
Q4) GAAP stands for "General American Accounting Principles."
A)True B)False
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Chapter 5: Evaluating Operating and Financial Performance
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64 Verified Questions
64 Flashcards
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Sample Questions
Q1) Investment bankers are users of financial ratios and measures of ventures primarily during the rapid-growth stage relative to the development and startup stages.
A)True
B)False
Q2) What is the return on equity for Runs and Goses?
A)26.1%
B)44.7%
C)62.6%
D)18.4%
E)7.9%
Q3) What is Runs and Goses' return on total assets?
A)9.6%
B)13.6%
C)19.1%
D)37.9%
E)22.5%
Q4) Trend analysis is used to examine a venture's performance over time. A)True B)False
7
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Chapter 6: Managing Cash Flow
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37 Verified Questions
37 Flashcards
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Sample Questions
Q1) Which one of the following conversion periods operates to reduce the length of the cash conversion cycle?
A)inventory-to-sale conversion period
B)sale-to-cash conversion period
C)purchase-to-payment conversion period
D)fixed assets-to-usage conversion period
Q2) A cash budget shows a venture's projected revenues and expenses over a forecast period.
A)True
B)False
Q3) Early-stage ventures are defined as firms that are only operating in either their development or startup stages.
A)True
B)False
Q4) Cash shortages during the rapid growth stage frequently derive from the lack of operating profits to fund working capital and fixed asset investments needed to support sales growth.
A)True B)False
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Chapter 7: Types and Costs of Financial Capital
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68 Verified Questions
68 Flashcards
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Sample Questions
Q1) 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
Q2) Calculate the after-tax WACC based on the following information:nominal interest rate on debt = 16%; cost of common equity = 30%; equity to value = 60%; debt to value = 40%; and a tax rate = 25%.
A)10%
B)16%
C)19.8%
D)22.8%
E)30%
Q3) Formal historical accounting procedures include explicit records of debt (interest and principal)and dividend capital costs.
A)True
B)False
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9
Chapter 8: Securities Law Considerations When Obtaining Venture Financing
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77 Verified Questions
77 Flashcards
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Sample Questions
Q1) While Section 4(2)does not limit the dollar amount of an offering,the interpretation of the law has stipulated that:
A)the investors must be sophisticated
B)the number of investors must be limited to 35
C)the funds must be raised within a 12-month period
D)the offering must be extended to the public,and not only investors Who have a relationship with the issuer
Q2) Which one of the following "rules" under Regulation D has a $5 million financing limit?
A)Rule 504
B)Rule 505
C)Rule 506
D)Rule 507
E)Rule 508
Q3) Rule 504 of Regulation D limits the total number of investors to:
A)35
B)100
C)35 unaccredited investors and any number of accredited investors
D)there is no limit on the number of accredited or unaccredited Investors
10
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Chapter 9: Projecting Financial Statements
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61 Verified Questions
61 Flashcards
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Sample Questions
Q1) During which life cycle stage is a venture typically most accurate in forecasting sales?
A)rapid growth stage
B)startup stage
C)development stage
D)early-maturity stage
E)survival stage
Q2) The increase in accounts payables and accruals that occur with a sales increase is called:
A)spontaneously generated funds
B)additional funds needed
C)addition in retained earnings
D)financial capital needed
Q3) A customer-driven or "bottom-up" approach to forecasting sales is used primarily to forecast industry sales growth rates.
A)True
B)False
Q4) The sustainable sales growth rate is equal to ROA times the retention ratio. A)True
B)False
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Chapter 10: Valuing Early-Stage Ventures
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63 Verified Questions
63 Flashcards
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Sample Questions
Q1) A pseudo dividend involves excess cash that does not need to be invested in a venture's assets or operations,and may be invested elsewhere for a period of time.
A)True
B)False
Q2) Your firm has been in business for two years.In its first year,the firm ended with $227,000 of current assets,long-term assets of $143,000,$70,000 in surplus cash,current liabilities of $52,000,and long-term assets of $68,000.At the end of the second year,current assets were $279,000,long-term assets of $195,000,surplus cash of $90,000,current liabilities of $62,000,and long-term assets of $78,000.What is your firm's change in net operating working capital?
A)$22,000
B)$62,000
C)$42,000
D)$244,000
E)$32,000
Q3) The "terminal" value is the value of the venture at the beginning of the explicit forecast period.
A)True
B)False
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Page 12
Chapter 11: Venture Capital Valuation Methods
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55 Verified Questions
55 Flashcards
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Sample Questions
Q1) Estimate the value of a privately-held firm based on the following information:stock price of a comparable firm = $20.00; net income of a comparable firm = $20,000; number of shares outstanding for the comparable firm = 10,000; and earnings per share for the target firm = $3.00.
A)$10.00
B)$20.00
C)$30.00
D)$40.00
E)$50.00
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) 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
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Page 13
Chapter 12: Professional Venture Capital
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) SLOR stands for "standard letter of rejection."
A)True
B)False
Q2) The phrase "two and twenty shops" refers to investment management firms having a contract that gives them two percent carried interest and 20 percent of assets annual management fee.
A)True
B)False
Q3) The beginning of professional venture capitalists is considered to have begun with the establishment or formation of:
A)Small Business Administration
B)Small Business Investment Companies
C)American Research and Development organization
D)Professional Venture Capitalists organization
Q4) When a syndicate of VCs invests in a venture,the investor in charge of organizing the due diligence process is known as the "lead investor."
A)True
B)False
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Page 14
Chapter 13: Other Financing Alternatives
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61 Verified Questions
61 Flashcards
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Sample Questions
Q1) Commercial banks receive a portion of their returns from warrants in addition to the receipt of interest and the repayment of the principal that was lent.
A)True
B)False
Q2) Microloans in the SBA credit program are intended for very small businesses with a maximum amount of $35,000 to be used for general purposes.
A)True
B)False
Q3) With venture leasing,one component of the return to the lessor is the opportunity to take an equity interest in the venture.
A)True
B)False
Q4) All of the following are common loan restrictions except?
A)limits on total debt
B)limits on total equity
C)restrictions on dividends or other payments to owners and/or investors
D)restrictions on additional capital expenditures
E)performance standards on financial ratios
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Page 15
Chapter 14: Security Structures and Determining Enterprise
Values
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58 Verified Questions
58 Flashcards
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Sample Questions
Q1) Preferred stock is the equity claim senior to common stock providing preference on dividends but not liquidation proceeds.
A)True
B)False
Q2) Which of the following requires that all previously unpaid preferred dividends must be paid prior to any common dividend?
A)paid in kind preferred stock
B)cumulative preferred stock
C)participating preferred stock
D)convertible preferred stock
E)non-cumulative preferred stock
Q3) Which of the following offers the option where the dividend obligation can be satisfied in cash or by issuing additional par amounts of the preferred security?
A)paid in kind preferred stock
B)cumulative preferred stock
C)participating preferred stock
D)convertible preferred stock
E)non-cumulative preferred stock
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Chapter 15: Harvesting the Business Venture Investment
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68 Verified Questions
68 Flashcards
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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) When harvesting a venture,the methodical distribution of assets directly to the owners is known as a systematic liquidation.
A)True
B)False
Q3) In the aftermarket trading for the venture's securities,an order that is to be executed as soon as possible at the prevailing market price is known as a:
A)put order
B)market order
C)limit order
D)stop order
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Chapter 16: Financially Troubled Ventures: Turnaround Opportunities
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67 Verified Questions
67 Flashcards
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Sample Questions
Q1) Operations restructuring involves which of the following:
A)growing revenues relative to costs
B)cutting costs relative to revenues
C)reducing net working capital
D)reducing the cash conversion cycle
E)a and b above
F)c and d above
Q2) The common pool problem exists because individual creditors have the incentive to foreclosure on the venture even though it is worth more as a going concern.
A)True
B)False
Q3) The transfer of title to the venture's assets to a third-party trustee is called assignment.
A)True
B)False
Q4) "Balance sheet insolvency" exists when a venture has negative book equity or net worth.
A)True
B)False
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