Entrepreneurship
Solved Exam Questions
Course Introduction
This course provides students with a comprehensive introduction to the fundamentals of entrepreneurship, focusing on the process of identifying, evaluating, and developing new business opportunities. Through case studies, practical exercises, and interactive discussions, students will explore the characteristics of successful entrepreneurs, methods for generating innovative ideas, strategies for securing funding, and essentials of business planning and management. The course also covers the ethical, social, and economic impacts of entrepreneurship, empowering students to turn their concepts into viable ventures in a dynamic global marketplace.
Recommended Textbook
Entrepreneurial Finance 5th Edition by J.
Chris Leach
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16 Chapters
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Page 2
Chapter 1: Introduction to Finance for Entrepreneurs
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Sample Questions
Q1) Lindsey and Tobias have the opportunity to invest in a project that requires an investment of $3,000.There is a 35% chance of a $2,900 return; a 40% chance of a $3,400 return; and a 25% chance of a $4,500 return one year from now.Lindsey requires a 15% return on the project after the first year,but Tobias requires a return of only 12%.Using the expected rate of return:
A)Lindsey and Tobias should both invest in the project
B)Only Tobias should invest in the project
C)Only Lindsey should invest in the project
D)Lindsey and Tobias should both reject the project
Answer: A
Q2) Indicate the number of principles of entrepreneurial finance that are emphasized in this textbook:
A)one
B)three
C)five
D)seven
E)nine
Answer: D
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Chapter 2: Developing the Business Idea
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Sample Questions
Q1) A viable venture opportunity is characterized by all of the following except?
A)creating or meeting a customer need
B)has perceived attraction to prospective investors
C)provides an initial competitive advantage
D)is timely in terms of time-to-market
E)offers the expectation of added value to investors
Answer: B
Q2) Determine the asset intensity of a venture with the following financial information: net profit = $22,000; revenues = $132,000; return on assets 30%.
A).05
B).56
C)1.8
D)20
Answer: B
Q3) A venture with a low score on the VOS Indicator should always be abandoned. A)True
B)False
Answer: False
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Chapter 3: Organizing and Financing a New Venture
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Sample Questions
Q1) Which of the following is not a "kind" of patent?
A)Utility
B)Design
C)Mark
D)Plant
E)Business method
Answer: C
Q2) A trademark must be novel in order to receive protection.
A)True
B)False
Answer: False
Q3) Based on 2012 tax schedules,the first dollar of corporate income is taxed at which of the following marginal tax rates:
A)05.0%
B)10.0%
C)15.0%
D)20.0%
E)25.0%
Answer: C
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Page 5
Chapter 4: Preparing and Using Financial Statements
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Sample Questions
Q1) Financial statement that shows how cash,as reflected in accrual accounting,flows into and out of a company during a specific period of operation is called the:
A)income statement
B)balance sheet
C)statement of retained earnings
D)statement of cash flows
Q2) What is Acme's net income?
A)$2,720
B)$897.60
C)$6,460
D)$2,040
E)$1,320
Q3) The balance sheet equation is: Total Assets = Total Liabilities + Net Income.
A)True
B)False
Q4) Startup financing (e.g.,financing from business angels and venture capitalists)usually occurs during the development stage in a new venture's life cycle.
A)True
B)False
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Chapter 5: Evaluating Operating and Financial Performance
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Sample Questions
Q1) The total-debt-total-asset ratio for Runs and Goses is?
A)0.48
B)0.71
C)0.27
D)0.53
E)0.82
Q2) "Net cash burn" is calculated as:
A)cash burn plus cash build
B)cash build minus cash burn
C)cash burn minus cash build
D)cash burn minus cash build squared
Q3) Net income divided by net sales is called which of the following ratios?
A)net operating profit after taxes margin
B)net profit margin'
C)operating profit margin
D)gross profit margin
Q4) The current ratio and the quick ratio differ only because average inventories are subtracted in the numerator of the quick ratio.
A)True
B)False
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Chapter 6: Managing Cash Flow
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Sample Questions
Q1) The actions of screening business ideas,preparing a business model/plan,and obtaining seed financing occurs during a venture's development stage.
A)True
B)False
Q2) Based on the following information,determine the average receivables (rounded to thousands of dollars)that were outstanding: Net sales = $575,000; Sale-to-cash conversion period = 57.1 days; Purchase-to-payment conversion period = 76.8 days; and Cost of goods sold = $380,000.
A)$90,000
B)$180,000
C)$121,000
D)$31,000
E)$41,000
Q3) The sum of the inventory-to-sale conversion period and the purchase-to-payment conversion period minus the sale-to-cash conversion period is called the cash conversion cycle.
A)True
B)False
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8
Chapter 7: Types and Costs of Financial Capital
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Sample Questions
Q1) The difference between average annual returns on common stocks and returns on long-term government bonds is called a:
A)default risk premium
B)maturity premium
C)risk-free premium
D)liquidity premium
E)market risk premium
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) The "prime rate" is the interest rate charged by banks to their highest default risk business customers.
A)True
B)False
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Page 9
Chapter 8: Securities Law Considerations When Obtaining Venture Financing
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Sample Questions
Q1) The U.S.federal law that impacts the creation and sales of securities is:
A)Securities Exchange Act of 1934
B)Securities Act of 1933
C)Investment Company Act of 1940
D)Investment Advisers Act of 1940
Q2) 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
Q3) Regulation A issuers are allowed to "test the waters" before preparing the offering circular (unlike almost all other security offerings).
A)True
B)False
Q4) State laws designed to protect high net-worth investors from investing in fraudulent security offerings are known as blue-sky laws.
A)True
B)False
Page 10
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Chapter 9: Projecting Financial Statements
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Sample Questions
Q1) The "constant-ratio forecasting method" is a variant of the "percent-of-sales forecasting method."
A)True
B)False
Q2) A sales growth rate based on the retention of profits is referred to as the:
A)real sales growth rate
B)sustainable sales growth rate
C)spontaneous sales growth rate
D)nominal sales growth rate
E)weighted average sales growth rate
Q3) "Additional funds needed" (AFN)is the gap remaining between the financial capital needed and that funded by spontaneously generated funds and retained earnings.
A)True
B)False
Q4) In a typical venture's life cycle,the rapid-growth stage involves creating and building value,obtaining additional financing,and examining exit opportunities.
A)True
B)False
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Chapter 10: Valuing Early-Stage Ventures
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Sample Questions
Q1) The calculation of equity valuation cash flows nets the cash impact of all other balance sheet and income accounts to focus on the ______ account as the repository of any remaining cash flow.
A)cash
B)debt
C)equity
D)non-interest-bearing liabilities
E)net income
Q2) Estimate a venture's terminal value based on the following information:current year's net income = $20,000; next year's expected cash flow = $26,000; constant future growth rate = 7%; and venture investors' required rate of return = 20%.
A)$156,846
B)$285,714
C)$200,000
D)$150,000
E)$428,571
Q3) A venture's reversion value is the present value of ongoing expenses.
A)True
B)False
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Page 12
Chapter 11: Venture Capital Valuation Methods
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Sample Questions
Q1) During the exit period,which of the following will have last crack at the venture's wealth?
A)banks giving loans to the venture
B)convertible debt holders of the venture
C)initial equity investors of the venture
D)participating preferred equity holders
Q2) The basic venture capital method estimates a venture's value using only terminal/exit flows to all the venture's owners.
A)True
B)False
Q3) What is the post-money valuation?
A)$658,354
B)$499,954
C)$408,377
D)$249,977
Q4) 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
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Chapter 12: Professional Venture Capital
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Sample Questions
Q1) When screening possible investments,a venture capital firm might issue an SLOR which stands for:
A)standard letter of rejection
B)standing letter of reconciliation
C)standard letter of reassessment
D)senior letter of reference
Q2) Term sheets are usually drafted by:
A)the mangers of the venture seeking VC funding
B)the VC fund seeking to fund the venture
C)management and founders
D)it is usually done by an third party,in order to Ensure the fair treatment of both parties
Q3) According to Figure 12.4,individuals and families were the largest supplier of venture capital in 2009.
A)True
B)False
Q4) Term sheets may contain demands regarding the voting rights of shares issued to venture investors.
A)True
B)False
Page 14
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Chapter 13: Other Financing Alternatives
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Q1) In which of the following credit programs does the SBA approve a loan and guarantees up to 85% of loan value?
A)7(a)loan
B)504 loan
C)microloan
D)venture capital loan
E)credit card loan
Q2) The SBA's venture capital credit program works through Community Development Financial Institutions (CDFIs).
A)True
B)False
Q3) The use of receivables as collateral for a loan is known as:
A)capital leasing
B)warehouse financing
C)receivables lending
D)a microloan
E)venture leasing
Q4) The 7(a)loan traditionally has been the SBA's primary loan program
A)True
B)False
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Chapter 14: Security Structures and Determining Enterprise
Values
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Sample Questions
Q1) The enterprise value includes the value of the debt,equity,and warrant pieces of a venture.
A)True
B)False
Q2) Warrant valuation (as presented in this text)is similar to option valuation except that one applies a dilution factor to the option value to arrive at a warrant value.
A)True
B)False
Q3) To calculate the enterprise valuation cash flow,one begins with which of the following items from the income statement?
A)net sales
B)operating profit
C)(earnings before interest and taxes)× (1 - enterprise tax rate)
D)net income
E)net income times the enterprise tax rate
Q4) Owning a put option on a stock is the same as selling a call option on that same stock.
A)True
B)False
Chapter 15: 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) When harvesting a venture,the two-step public equity registration and sale is known as an outright sale.
A)True
B)False
Q4) The sale of used shares of common stock is a secondary market offering.
A)True
B)False
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Chapter 16: Financially Troubled Ventures: Turnaround Opportunities
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Sample Questions
Q1) Which of the following refers to when a bankruptcy court accepts a reorganization plan for all creditors including dissenting creditor classes?
A)automatic stay provision
B)holdout problem
C)cram down procedure
D)net worth requirements
Q2) When a venture is in financial distress but believes it has a turnaround opportunity,which of the following won't apply?
A)operations restructuring
B)asset restructuring
C)private liquidation
D)financial restructuring
Q3) During the survival stage of a venture's life cycle,which of the following is not a basis for operating or financial decisions?
A)monitoring financial performance
B)obtaining seasoned financing
C)projecting cash needs
D)obtaining first round financing
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