Venture Capital and Private Equity
Chapter Exam Questions
Course Introduction
This course explores the principles and practices of venture capital and private equity, focusing on their roles in financing start-ups and mature companies. Students will gain insights into fundraising, investment strategies, deal structuring, valuation techniques, due diligence, and exit mechanisms. The curriculum also examines the perspectives of entrepreneurs, investors, and fund managers, providing a comprehensive understanding of the investment cycle from capital sourcing to portfolio management and exit strategies. Through case studies and real-world examples, students will develop the analytical skills necessary to evaluate investment opportunities and understand the broader economic and regulatory environment influencing private market investments.
Recommended Textbook
Entrepreneurship Successfully Launching New Ventures 3rd Edition by Bruce R. Barringer
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Chapter 1: Introduction to Entrepreneurship
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Sample Questions
Q1) Which of the following is not one of the five common myths about entrepreneurs?
A) Entrepreneurs are networkers.
B) Entrepreneurs are moderate risk takers.
C) Entrepreneurs should be young and energetic.
D) Entrepreneurs love the spotlight.
E) Entrepreneurs are born not made.
Answer: A
Q2) The What Went Wrong? feature in Chapter 1 focuses on ProtectMyPhotos, a company that was launched in 2006 but eventually went out of business. According to the feature, the business failed primarily as a result of:
A) a loss of passion for the business idea
B) poor execution
C) a lack of tenacity on the part of the founders
D) a lack of funding
E) a lack of managerial expertise
Answer: A
Q3) The most active age range for business ownership is 35 to 45 years old.
A)True
B)False
Answer: True
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Chapter 2: Recognizing Opportunities and Generating Ideas
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Sample Questions
Q1) The term "window of opportunity," as discussed in Chapter 2, describes the time period in which a firm can:
A) obtain funding or financing
B) hire new employees
C) obtain patent protection for a new product
D) realistically enter a new market
E) get government approval for a regulated product or service
Answer: D
Q2) Which of the following is not an example of a social force?
A) changes in interest rates
B) increased interest in healthy foods
C) retirement of baby boomers
D) increased diversity of the workforce
E) increased interest in green products
Answer: A
Q3) An idea bank is a physical or digital repository for storing ideas.
A)True
B)False
Answer: True
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Chapter 3: Feasibility Analysis
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Sample Questions
Q1) A ________ market is a place within a larger market segment that represents a narrower group of customers with similar needs.
A) secondary
B) primary
C) target
D) parallel
E) minor
Answer: C
Q2) Which of the following statement is incorrect regarding the First Screen?
A) The mechanics of filling out the First Screen worksheet are straightforward.
B) It covers three of the four areas of feasibility analysis described in the textbook.
C) It is a template for completing a feasibility analysis.
D) Completing a First Screen is not meant to be a lengthy process.
E) The value of the First Screen is that it draws attention to the most important issues pertaining to the feasibility of a business idea.
Answer: B
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5
Chapter 4: Writing a Business Plan
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Sample Questions
Q1) The document that does the best job of introducing potential investors and other stakeholders with the business opportunity the firm is pursuing and how it plans to pursue it is the:
A) business plan
B) feasibility analysis
C) opportunity analysis
D) industry analysis
E) marketing plan
Q2) The ________ section of a business plan breaks the industry into segments and zeroes in on the specific segment (or target market) to which the firm will try to appeal to.
A) competitive analysis
B) current status
C) market analysis
D) marketing plan
E) operations plan
Q3) A business plan is typically between 25 and 35 pages long.
A)True
B)False
Q4) What are the two main reasons for writing a business plan.
Page 6
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Chapter 5: Industry and Competitor Analysis
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Sample Questions
Q1) The two most common strategies pursued by firms in global industries are the ________ strategy and the ________ strategy.
A) inclusive, multidomestic
B) multidomestic, global
C) multidomestic, worldwide
D) inclusive, global
E) home, worldwide
Q2) Firms that pursue a ________ strategy compete for market share on a country-by-country basis and vary their product or service offerings to meet the demands of the local market.
A) inclusive
B) universal
C) multidomestic
D) contemporary
E) worldwide
Q3) A fragmented industry is one that is characterized by a small number of firms or approximately equal size.
A)True
B)False
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Page 7
Chapter 6: Developing an Effective Business Model
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Sample Questions
Q1) Why is it important for a firm to have a well-thought-out business model?
Q2) ________ is the process of adapting a firm's core competencies to exploit new opportunities.
A) Resource leverage
B) Capacity proficiency
C) Ability leverage
D) Aptitude embellishment
E) Capacity extension
Q3) Which of the following is a "primary" activity in the value chain?
A) resource procurement
B) technology development
C) service
D) firm infrastructure
E) human resource management
Q4) What is meant by the statement, "A firm's business model takes it beyond its own boundaries?" Provide an example to illustrate your answer.
Q5) Historically, it has been difficult for a new venture to use a cost leadership strategy. A)True
B)False
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Chapter 7: Preparing the Proper Ethical and Legal Foundation
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Q1) ________ are a special form of incentive compensation. These plans provide employees the option or right to buy a certain number of shares of their company's stock at a stated price over a certain period of time.
A) Corporate options
B) Collective plans
C) Share plans
D) Stock options
E) Dividends
Q2) ________ is typically issued to conservative investors who have preferential rights over common stockholders in regard to dividends and to the assets of the corporation in the event of liquidation.
A) Restricted stock
B) Partial stock
C) Preferred stock
D) Common stock
E) Limited liability stock
Q3) Few entrepreneurial firms start as subchapter S corporations.
A)True
B)False
Page 9
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Chapter 8: Assessing a New Venture's Financial Strength and Viability
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Q1) A firm's profit margin, or return on sales, is computed by dividing net income by net sales.
A)True
B)False
Q2) Budgets are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.
A)True
B)False
Q3) A firm's working capital is its:
A) inventory and accounts receivable minus its current liabilities
B) current assets minus its current liabilities
C) total assets minus its total liabilities
D) cash and cash equivalents minus its current liabilities
E) accounts receivable minus its total accounts payable
Q4) A firm's working capital is defined as its fixed assets minus its long-term liabilities.
A)True
B)False
Q5) Describe the difference between historical and pro form financial statements.
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Chapter 9: Building a New Venture Team
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Q1) According to the textbook, which of the following statement is inaccurate regarding the size and composition of the founding team of a firm?
A) There is no relationship between a founding team's size and its effectiveness.
B) A founding team larger than four people is typically too large to be practical.
C) The members of a homogeneous founding team are similar in terms of their abilities and experiences.
D) The members of a heterogeneous founding team are diverse in terms of their abilities and experiences.
E) A founding team can be too big, causing communication problems and increasing potential for conflict.
Q2) Most boards of advisers have between 5 and 15 members. A)True
B)False
Q3) What is the difference between a heterogeneous and a homogeneous founding team? Which type of team has the advantage?
Q4) What is SCORE? What is its role in helping a firm fill out its new venture team?
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11
Chapter 10: Getting Financing or Funding
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Sample Questions
Q1) A brief carefully constructed statement that outlines the merits of a business opportunity is called an:
A) subway speech
B) sway speech
C) bootstrap speech
D) teaser speech
E) elevator speech
Q2) Which of the following is not a source of equity funding?
A) initial public offering
B) angel investors
C) private placement
D) venture capital
E) government grants
Q3) Historically, the vast majority of SBIR Phase 1 proposals are approved.
A)True
B)False
Q4) What is a business angel? Describe the prototypical business angel. How much money do business angels typically invest in a single company?
Q5) Why do most firms need funding? Provide a brief explanation of each reason.
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Chapter 11: Unique Marketing Issues
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Sample Questions
Q1) A firm runs the risk of upsetting its channel partners if it sells through two channels simultaneously which compete for the same customer. For example, if Electronic Arts sold its electronic games through retailers like Wal-Mart and Best Buy, and then started selling the same games online, Wal-Mart and Best Buy might get upset, because the online sales undermine their ability to sell the games through their stores. This type of situation is referred to as:
A) channel clash
B) marketing clash
C) channel piracy
D) disintermediation
E) channel conflict
Q2) A firm's marketing mix is the assortment of products and services that it sells.
A)True
B)False
Q3) A product attribute map illustrated the strength of a firm's niche (or target) market relative to competing markets.
A)True
B)False
Q4) What is a brand? How does a new firm develop a brand?
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Chapter 12: The Importance of Intellectual Property
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Q1) Which of the following was not identified in the textbook as one of the common mistakes that entrepreneurs make regarding intellectual property?
A) not fully recognizing the value of their intellectual property
B) not properly identifying all their intellectual property
C) not properly registering their Internet domain names
D) not using their intellectual property as part of their overall plan for success
E) not taking sufficient steps to protect their intellectual property
Q2) Which of the following are the four key forms of intellectual property protection?
A) patents, copyrights, trademarks, and trade secrets
B) discoveries, convents, trademarks, patents
C) patents, official documents, copyrights, inventions
D) discoveries, Internet domain names, innovations, trademarks
E) convents, inventions, opportunities, and copyrights
Q3) What is a copyright? What is protected by a copyright?
Q4) The owner of a patent is granted a legal monopoly for an unlimited period of time. A)True B)False
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Chapter 13: Preparing for and Evaluating the Challenges of Growth
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Q1) The majority of businesses go through a discernable set of stages of growth referred to as the:
A) business rotation cycle
B) business existence cycle
C) organizational sequence
D) business life cycle
E) organizational life cycle
Q2) Emily Wills owns a commercial printing company. Emily has more business than she wants, in fact, she is presently turning away exciting new business opportunities because it is expensive to hire new employees, and she knows that if she did hire new employees it would take time for the new employees to be trained and to be socialized into the culture of her firm. Emily's inability to take advantage of the new business opportunities that are coming her way is due largely to the:
A) business aptitude problem
B) entrepreneurial aptitude problem
C) commercial opportunity problem
D) business capacity problem
E) managerial capacity problem
Q3) What is the organizational life cycle and why is it important?
Page 15
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Chapter 14: Strategies for Firm Growth
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Q1) In an acquisition, the surviving firm is called the ________, and the firm that is acquired is called the ________.
A) target, acquirer
B) goal, objective
C) objective, aggressor
D) acquirer, target
E) aggressor, objective
Q2) Laura Watts owns a printing company. Over the past three years, Laura has significantly increased her sales through the outright purchase of other printing firms. Laura is pursuing a(n) ________ strategy.
A) acquisition
B) merger
C) strategic alliance
D) joint venture
E) licensing
Q3) Licensing is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions.
A)True
B)False
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Page 16
Chapter 15: Franchising
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Q1) According to a concept called ________ theory, it is more effective for the units of a growing chain to be run by franchises than by managers, because managers are usually paid a salary, and may not be as committed to the success of their individual units as franchisees, who are in effect the owners of the units they manage.
A) agency
B) stimulus
C) control
D) leadership
E) motivation
Q2) Franchisors are required by law to disclose all their costs in a document called the Franchise Disclosure Document.
A)True
B)False
Q3) Despite its advantages, franchising is not a popular form of business growth.
A)True
B)False
Q4) List and explain three of the common misconceptions about franchising.
Q5) How can a person tell if franchising is right for them?
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