New Venture Creation Practice Exam
Course Introduction
New Venture Creation is a dynamic course designed to equip students with the skills and knowledge necessary to identify, evaluate, and launch new business ventures. The course covers the entrepreneurial process from opportunity recognition and business model development to resource acquisition and startup strategy. Emphasizing both theoretical frameworks and practical applications, students will learn how to develop business plans, secure funding, assess market viability, and manage the early stages of organizational growth. Through case studies, interactive workshops, and real-world projects, students gain hands-on experience in turning innovative ideas into successful startups.
Recommended Textbook
Entrepreneurial Finance 4th Edition by
J. Chris Leach
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15 Chapters
1018 Verified Questions
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Page 2
Chapter 1: Introduction and Overview
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Sample Questions
Q1) Free cash exists when cash exceeds that which is needed to operate,pay creditors,and invest in assets.
A)True
B)False
Answer: True
Q2) The stage that precedes the middle 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: E
Q3) "Fads" are:
A)not predictable
B)have short lives
C)do not involve macro changes
D)all of the above
Answer: D
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Page 3
Chapter 2: From the Idea to the Business Plan
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Sample Questions
Q1) "Salary-replacement" firms provide their owners with income levels comparable to what they could have earned working for much larger firms.
A)True
B)False
Answer: True
Q2) Determine the return on assets (ROA)for a venture with the following financial information: revenues = $500,000;net profit = $70,000;and asset turnover =2.00 times.
A)10%
B)14%
C)20%
D)28%
E)34%
Answer: D
Q3) Ideas that are said to be "ahead of their time" are too early to become viable business opportunities for the inventor or innovator.
A)True
B)False
Answer: True
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4
Chapter 3: Organizing and Financing a New Venture
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Sample Questions
Q1) Business angels are wealthy individuals who invest in early-stage ventures in exchange for the excitement of launching the business,as well as a share of the firm's financial gains.
A)True
B)False
Answer: True
Q2) Based on 2009 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
Q3) 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) The balance sheet equation is: Total Assets = Total Liabilities + Net Income.
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) The reduction in value of a fixed asset over its expected life intended to reflect the usage or wearing out of the asset is called accumulated depreciation.
A)True
B)False
Q4) Seed financing (e.g. ,financing from the entrepreneur's assets,family,and friends)usually occurs during the development stage in a new venture's life cycle.
A)True
B)False
Q5) GAAP stands for "Generally Accepted Accounting Principles."
A)True
B)False
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Page 6
Chapter 5: Evaluating Financial Performance
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Sample Questions
Q1) What is Runs and Goses' sales to total asset ratio?
A)1.91
B)0.25
C)0.52
D)0.23
E)0.57
Q2) Which of the following is used to examine a venture's performance over time?
A)qualitative analysis
B)trend analysis
C)cross sectional analysis
D)industry comparable analysis
Q3) Calculate the inventory-to-sale conversion period based on the following information:average inventories = $120,000;average receivables = $90,000;average payables = $40,000;cost of goods sold = $182,500;and net sales = $365,000.
A)240.0 days
B)180.0 days
C)90.0 days
D)60.0 days
E)45.0 days
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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)= 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%
Q2) Public or seasoned financing is generally associated with which one of the following life cycle stages:
A)development stage
B)startup stage
C)survival stage
D)rapid-growth stage
E)maturity stage
Q3) The weighted average of a set of possible outcomes or scenarios is known as expected values.
A)True
B)False
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Page 8
Chapter 7: Types and Costs of Financial Capital
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Q1) 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%
Q2) The "real interest rate" (RR)is the interest one would face in the absence of inflation,risk,illiquidity,and any other factors determining the appropriate interest rate.
A)True
B)False
Q3) The graph of the term structure of interest rates,which plots interest rates to time to maturity is called the yield curve.
A)True
B)False
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Chapter 8: Securities Law Considerations When Obtaining Venture Financing
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Sample Questions
Q1) "Security" exemptions from registration with the SEC include which of the following:
A)securities issued by banks and thrift institutions
B)government securities
C)intrastate offerings
D)securities issued by large,high quality corporations
E)a,b,and c above
F)a,b,c,and d above
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) According to the Investment Advisers Act of 1940,a bank would not be classified as an "investment advisor".
A)True
B)False
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Page 10
Chapter 9: Valuing Early-Stage Ventures
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Sample Questions
Q1) The equity valuation method involving zero explicitly forecasted dividends and an adjustment to working capital to strip surplus cash is called?
A)maximum dividend method
B)pseudo dividend method
C)sustainable growth method
D)dividend payout method
Q2) "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
Q3) Estimate a venture's cash flow expected next year based on the following information:current year's net sales = $400,000;terminal value = $500,000;constant future growth rate = 10%;and venture investors' required rate of return = 20%.
A)$20,000
B)$40,000
C)$50,000
D)$60,000
E)$80,000
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11
Chapter 10: Venture Capital Valuation Methods
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Sample Questions
Q1) The discount rate that one applies in a multiple scenario valuation will usually be lower than the discount rate that would be applied to the business plan cash flows.
A)True
B)False
Q2) Determine the net income of a "comparable" firm based on the following information:value of target firm = $4,000,000;net income of target firm = $200,000;stock price of "comparable" firm = $30.00;and 300,000 shares of stock outstanding for the comparable firm.
A)$450,000
B)$500,000
C)$550,000
D)$600,000
E)$700,000
Q3) The VSCS and DDA methods are "just-in-time" capital methods which do not assess capital charges for idle cash.
A)True
B)False
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12
Chapter 11: Professional Venture Capital
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Sample Questions
Q1) Professional venture capital,as we know it today,did not exist before World War II.
A)True
B)False
Q2) A venture fund calls upon its investors to deliver their investment funds.This is known as:
A)due diligence
B)deal flow
C)a capital call
D)carried interest
E)a SLOR
Q3) Endowments and foundations are more important suppliers of venture capital relative to individuals and families.
A)True
B)False
Q4) "Due diligence," in venture investing context,is the process of ascertaining the viability of a business plan.
A)True
B)False
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Page 13
Chapter 12: Other Financing Alternatives
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Sample Questions
Q1) Which is not a duty of the Small Business Administration?
A)provide capital and credit to entrepreneurial start-ups
B)guaranteeing general business loans
C)provide equity financing for start-ups
D)help create new jobs in small businesses
E)help small firms obtain Federal contracts
Q2) Because investors and commercial lenders both seek returns on the funds given to start-up firms,entrepreneurs can obtain financing as easily from either source.
A)True
B)False
Q3) Which of the following is/are not a type of leasing arrangement?
A)factoring
B)capital lease
C)venture lease
D)mortgage lease
E)both a and d
Q4) The Small Business Administration was created by an Act of Congress in 2003.
A)True
B)False
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Chapter 13: Security Structures and Determining Enterprise
Values
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Sample Questions
Q1) An option that can be exercised only at its expiration date is called a:
A)forward contract
B)lookbackoption
C)American-Style option
D)European-Style option
E)Bermuda-Style option
Q2) Convertible preferred stockholders have the right to convert a preferred share into a specified number of common shares at any time after the expiration date.
A)True
B)False
Q3) A call option is the obligation to purchase a specific asset at a pre-determined price.
A)True
B)False
Q4) The Black and Scholes model requires an exercise price as an input.
A)True
B)False
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Chapter 14: Harvesting the Business Venture Investment
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Sample Questions
Q1) A venture can be harvested in which of the following ways?
A).systematic liquidation,outright sale,going public
B)outright sale,going public,acquisition
C)going public,acquisition
D)acquisition,systematic liquidation
Q2) In an outright sale of a venture,the venture can be sold to:
A)family members
B)managers
C)employees
D)outside (external)buyers
E)all of the above
Q3) When an initial business plan is prepared,attention should be paid to the investors' and founders' desire for eventual liquidity by anticipating a harvest for the venture investors.
A)True
B)False
Q4) The process of exiting the privately held business venture to unlock the owners' investment value is known as harvesting.
A)True
B)False
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Chapter 15: Financially Troubled Ventures: Turnaround Opportunities
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Sample Questions
Q1) Foreclosure is the legal process used by creditors to try to collect amounts owed on loans in default
A)True
B)False
Q2) The rule governing hierarchical order in which claim payments must be made during a bankruptcy is known as the:
A)cram-down procedure
B)absolute priority rule
C)prepackaged bankruptcy rule
D)involuntary bankruptcy rule
Q3) The ways,individually or in combination,for resolving financial distress are:
A)operations restructuring
B)financial restructuring
C)asset restructuring
D)all of the above
E)none of the above
Q4) An involuntary bankruptcy petition is filed by the venture's management.
A)True
B)False
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