Innovation and Venture Development Exam Review

Course Introduction

Innovation and Venture Development explores the processes, challenges, and strategies involved in bringing new ideas to life and turning them into successful ventures. This course covers the fundamentals of innovation, from identifying opportunities and generating creative solutions to evaluating feasibility and developing effective business models. Students learn how to design, validate, and launch new products or services, as well as the essentials of entrepreneurial thinking, funding strategies, and scaling ventures. Real-world case studies, project-based learning, and interaction with entrepreneurs and innovators prepare students to navigate uncertainty, drive change, and contribute to the growth of startups and established organizations alike.

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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86 Verified Questions

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Sample Questions

Q1) Which of the following is considered to be an "agency" conflict?

A)owner-manager conflict

B)stockholder-manager conflict

C)stockholder-debtholder conflict

D)manager-debtholder conflict

Answer: A

Q2) The last stage in a successful venture's life cycle is called the:

A)rapid growth stage

B)maturity stage

C)development stage

D)survival stage

E)startup stage

Answer: B

Q3) Owner-manager (agency)conflicts are differences between manager's self-interest and that of the owners who hired the manager.

A)True

B)False

Answer: True

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Chapter 2: From the Idea to the Business Plan

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82 Flashcards

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Sample Questions

Q1) Asset intensity is the net after-tax profit divided by total assets.

A)True

B)False

Answer: False

Q2) Determine the cost of goods sold for a venture with the following financial information: revenues = $50,000;net profit margin = 20%; gross profit margin = 70%

A)$40,000

B)$35,000

C)$15,000

D)$10,000

Answer: C

Q3) All else held constant,a higher asset turnover:

A)increases ROA

B)decreases ROA

C)has no effect on ROA

D)may raise or lower ROA,depending on how it affects revenues.

Answer: A

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Chapter 3: Organizing and Financing a New Venture

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79 Verified Questions

79 Flashcards

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Sample Questions

Q1) Which of the following is not a "type" of mark?

A)Trademark

B)Service mark

C)Collective mark

D)Certification mark

E)Design mark

Answer: E

Q2) Partnerships are treated with pass-through taxation.This means that profits and losses of the business pass directly through to investors on the basis specified in the partnership agreement.

A)True

B)False

Answer: True

Q3) Limited liability in the corporate business structure means creditors can seize only some of the corporation's assets.

A)True

B)False

Answer: False

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Chapter 4: Measuring Financial Performance

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Sample Questions

Q1) In breakeven analysis,solving for when EBITDA is equal to zero gives breakeven in terms of:

A)economic revenues

B)variable costs

C)survival revenues

D)fixed costs

Q2) Economic Value Added (EVA)is calculated as:

A)NOPAT plus after-tax dollar cost of financial capital used

B)ROE minus percentage cost of financial capital

C)NOPAT minus after-tax dollar cost of financial capital used

D)ROE plus the percentage cost of financial capital

Q3) Which one of the following is not considered to be a current asset?

A)cash

B)receivables

C)inventories

D)fixed assets

Q4) Net cash build occurs when the sum of cash flows from operations and investing is negative.

A)True

B)False

Page 6

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Chapter 5: Evaluating Financial Performance

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Sample Questions

Q1) Runs and Goses operating profit margin is?

A)26.2%

B)56.3%

C)43.3%

D)30.3%

E)60.0%

Q2) Accounting rules require that the current maturities of long-term debt obligations be classified as short-term liabilities.

A)True

B)False

Q3) Which of the following is used to compare a venture's performance against another firm at the same point in time?

A)qualitative analysis

B)trend analysis

C)cross sectional analysis

D)industry comparable analysis

Q4) The equity multiplier is considered an efficiency ratio.

A)True

B)False

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Chapter 6: Financial Planning:short Term and Long Term

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66 Verified Questions

66 Flashcards

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Sample Questions

Q1) An "expected value" is:

A)a simple average of a set of scenarios or possible outcomes

B)a weighted average of a set of scenarios or possible outcomes

C)the highest scenario value or outcome

D)the lowest scenario value or outcome

Q2) "Internally generated funds" is the cash produced from operating a firm over a specified time period.

A)True

B)False

Q3) Determine a venture's sustainable growth rate based on the following information:sales = $1,000,000;net income = $100,000;common equity at the beginning of the year = $500,000;and the retention rate = 50%.

A)10%

B)15%

C)20%

D)25%

E)30%

Q4) The sustainable sales growth rate is equal to ROA times the retention ratio.

A)True

B)False

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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) 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%

Q3) The excess average return of long-term government bonds over common stock is called the market risk premium.

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) Which SEC Regulation took effect in 1982 and provides the basis for "safe harbor" as a private placement?

A)Regulation A

B)Regulation B

C)Regulation C

D)Regulation D

E)Regulation E

Q2) Which one of the following is not a characteristic of Regulation A?

A)An offering is limited to $5 million

B)the number offerees or investors is limited to 35

C)the offering is a public offering

D)the securities issued can generally be freely resold

Q3) Ventures that reach their survival stage of their life cycles and seek first-round financing are typically organized as:

A)proprietorships or partnerships

B)LLCs or corporations

C)corporations

D)partnerships or LLCs

E)proprietorships or corporations

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Chapter 9: Valuing Early-Stage Ventures

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Sample Questions

Q1) When estimating the terminal value of a venture using an equity valuation method,a perpetuity growth equation is often applied that uses the capitalization rate for discounting purposes.This "cap" rate is measured as the:

A)equity discount rate minus the perpetuity growth rate

B)equity discount rate plus the perpetuity growth rate

C)risk-free rate plus the perpetuity growth rate

D)risk-free rate minus the perpetuity growth rate

Q2) 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

Q3) The reversion value of a venture is the present value of the venture's terminal value.

A)True

B)False

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Chapter 10: Venture Capital Valuation Methods

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Sample Questions

Q1) The value of the existing venture without the proceeds from the potential new equity issue is known as?

A)pre-money valuation

B)post money valuation

C)staged financing

D)the capitalization rate

Q2) What is the pre-money valuation?

A)$120,300

B)$316,800

C)$158,400

D)$193,900

Q3) What is the issue price per share?

A)$0.1939

B)$0.1203

C)$0.3168

D)$0.1584

Q4) All of the scenarios in a multiple scenario analysis must have exit cash flows in the same year.

A)True

B)False

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Chapter 11: Professional Venture Capital

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Sample Questions

Q1) In a Venture Capital Fund Placement Memorandum,all of the following are included in the summary of terms except?

A)indemnification

B)objective

C)liquidation

D)valuation

E)expenses

Q2) SLOR stands for "standard letter of rejection."

A)True

B)False

Q3) The first major government foray into venture investing came with the formation of the Small Business Administration (SBA)in 1947.

A)True

B)False

Q4) In the venture investing context,due diligence describes the process of investigating a potentially worthy concept or plan.

A)True

B)False

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Page 13

Chapter 12: Other Financing Alternatives

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Sample Questions

Q1) Direct public offerings have recently become a serious challenge to traditional venture capital firms.

A)True

B)False

Q2) Personal credit cards have proven to be a source of financing for start-up firms for all of the following reasons except?

A)credit card debt is not based on the firm'sability to repay,but rather the individual card holder's ability to repay

B)teaser rates afford initial low cost borrowing

C)balance transfer at below-prime rates

D)credit card debt can create problems if the firm doesn't generate cash flows to cover credit card payments once low introductory rates expire

Q3) 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

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Chapter 13: Security Structures and Determining Enterprise

Values

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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 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

Q3) A warrant is a type of call option.

A)True

B)False

Q4) The right to sell a specified asset at a specified price up until a specified date is called:

A)a forward contract

B)an American-style put option

C)an American-style call option

D)a European-style call option

E)a European style put option

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Chapter 14: Harvesting the Business Venture Investment

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Sample Questions

Q1) Shares registered with the Securities and Exchange Commission and state securities regulators and sold to the public are known as:

A)primary offering

B)secondary offering

C)initial public offering

D)shelf offering

Q2) Which of the following is the premium that would be applied to venture valuation due to an investor's majority ownership of a venture?

A)proxy premium

B)control premium

C)influence premium

D)liquidity premium

E)illiquidity premium

Q3) An advantage of an exit strategy that pays out the venture's investment value over several years can make it more difficult for entrepreneurs to start a new venture because adequate capital has not been released from the existing venture.

A)True

B)False

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Chapter 15: Financially Troubled Ventures: Turnaround Opportunities

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Sample Questions

Q1) Financial restructuring involves which of the following:

A)growing revenues relative to costs

B)reducing the cash conversion cycle

C)debt payments extension

D)debt composition change

E)a and b above

F)c and d above

Q2) Chapter 11 bankruptcy filing requires liquidation of the venture.

A)True

B)False

Q3) During the development,startup,and survival stages of a venture's life cycle,the relevant financing and operating decisions faced are either restructuring or liquidating.

A)True

B)False

Q4) Asset restructuring involves improving the working capital to sales relationships and/or selling off fixed assets.

A)True

B)False

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