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Venture Capital

Subject : industries
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. This word is used to describe businesses that are in trouble and whose management will cause the business to become profitable so they are no longer in trouble.






2. Date the LP's subscription is effective and they become partner






3. The maximum amount of cash that a partner is required to contribute under the terms






4. This refers to a synopsis of the key points of a business plan.






5. An investment in a startup business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.






6. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.






7. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan






8. No double tax - Limited number of investors






9. These are government-chartered venture firms that can invest only in companies that are at least 51 percent owned by members of a minority group or person recognized by the rules that govern this to be economically disadvantaged.






10. The residual ownership in a company like a corporation or LLC 51%=control






11. Compound internal rate of return.






12. These are lending and investment firms that are licensed by the federal government. The licensing enables them to borrow from the federal government to supplement the private funds of their investors. Some of these funds engage only in making loans t






13. The process whereby a group of venture capitalists will each put in a portion of the amount of money needed to finance a small business.






14. Equity securities of companies that have not 'gone public' (are not listed on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are not listed on an exchange - any investor wishing to sell






15. The party that manages a limited partnership and is liable for the debts of the company






16. The act of one company taking over controlling interest in another company. Investors often look for companies that are likely candidates for this - because the acquiring firms are often willing to pay a premium to the market price for the shares.






17. The first round of stock offered during the seed or early stage round by a portfolio company to the venture investor or fund. This stock is convertible into common stock in certain cases such as an IPO or the sale of the company. Later rounds of pref






18. The sale or distribution of a stock of a portfolio company to the public for the first time. IPOs are often an opportunity for the existing investors (often venture capitalists) to receive significant returns on their original investment. During peri






19. The equity ownership in a corporation. Also has basic voting rights






20. A business owned by stockholders who share in its profits but are not personally responsible for its debts






21. Document between general and limited partnership of each fund spells out details of the partnership.






22. The rate of return or profit that an investment is expected to earn.






23. Money used to purchase equity-based interest in a new or existing company. A venture capitalists return usually comes from preferred stock - a share of profits - royalties or capital appreciation of common stock. Most venture capitalists look for c






24. These are performance goals against which a company's success is measured. Often - they are used by investors to help determine whether a company will receive additional funding or whether management will receive extra stock. Sometimes management wi






25. The period an investor must wait before selling or trading company shares subsequent to an exit. Usually in an initial public offering this period is determined by the underwriters.






26. Money that business owners must pay back with interest. There are myriad types of these - from simple commercial loans to bridge/swing loans in which a lender makes a short-term loan in anticipation of equity financing at a later stage in the develo






27. 'I will buy stock at price we negotiate'






28. It refers mainly to insurance companies - pension funds and investment companies collecting savings and supplying funds to markets - but also to other types of institutional wealth (e.g. endowments funds - foundations etc.).






29. The total dollar value of all outstanding shares. Computed as shares multiplied by current price per share. Prior to an IPO - market capitalization is arrived at by estimating a company's future growth and by comparing a company with similar public






30. A financial institution specializing in the provision of equity and other forms of long-term capital to enterprises - usually to firms with a limited track record but with the expectation of substantial growth. The venture capitalist may provide bot






31. A detailed document that outlines what you are going to do and how you are going to do it - including a clear and simple discussion of the idea; the management team - including full resumes; business strategy; marketing plan - including sales projec






32. A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. This is a template that is used to develop more detailed legal documents.






33. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.






34. The valuation of a company prior to a round of investment. This amount is determined by using various calculation models - such as discounted P/E ratios multiplied by periodic earnings or a multiple times a future cash flow discounted to a present c






35. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.






36. A limited amount of equity or short-term debt financing typically raised within 6-18 months of an anticipated public offering or private placement meant to 'bridge' a company to the next round of financing.






37. The repurchasing of all of a company's outstanding stock by employees or a private investor. As a result of such an initiative - the company stops being publicly traded. Sometimes - the company might have to take on significant debt to finance the






38. Partner who does not share in a firm's management and is liable for its debts only to the limits of said partner's investment






39. Don't talk to the market about the company






40. Also known as a bell cow investor. Member of a syndicate of private equity investors holding the largest stake - in charge of arranging the financing and most actively involved in the overall project






41. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.






42. Issue of shares of a company to the public by the company (directly) for the first time.






43. This refers to obtaining capital from investors or venture capital sources.






44. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.






45. How you get to vote






46. A unit of ownership of a corporation. In the case of a public company - the stock is traded between investors on various exchanges. Owners of common stock are typically entitled to vote on the selection of directors and other important events and in






47. The first round of capital for a start-up business. Seed money usually takes the structure of a loan or an investment in preferred stock or convertible bonds - although sometimes it is common stock. Seed money provides startup companies with the cap






48. A type of equity ownership in a corporation - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights.






49. Funds provided to enable an enterprise to acquire another enterprise or product line or business.






50. The equity ownership in a LLC. May be either common or preferred. Partnership agreement