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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. 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.).






2. How you get out






3. 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






4. 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






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






6. Also called a 'Cap Table' - this is a table showing the total amount of the various securities issued by a firm. This typically includes the amount of investment obtained from each source and the securities distributed -- e.g. common and preferred s






7. The way you buy stock






8. Cannot get other outside investors-No Shop






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






10. Means of financing a small firm by employing highly creative ways of using and acquiring resources without raising equity from traditional sources or borrowing money from the bank.






11. 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.






12. The amount of this available to a management team for venture investments.






13. Compound internal rate of return.






14. 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.






15. A class of capital stock that may pay dividends at a specified rate and that has priority over common stock in the payment of dividends and the liquidation of assets. Many venture capital investments use preferred stock as their investment vehicle. T






16. Funds provided to enable operating management to acquire a product line or business - which may be at any stage of development - from either a public or private company.






17. The practice of a large company taking a minority equity position in a smaller company in a related field.






18. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities






19. An Agreement made between the investor and the company defining the rights and obligations of the parties involved. The process by which one arrives at the final term and conditions of the investment.






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






21. 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.






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






23. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value






24. How you get to vote






25. Shares acquired in a private placement are considered restricted shares and may not be sold in a public offering absent registration - or after an appropriate holding period has expired. Non-affiliates must wait one year after purchasing the shares






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






27. 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






28. The legal structure used by most venture and private equity funds. Usually fixed life investment vehicles. The general partner or management firm manages the partnership using policy laid down in a partnership agreement. The agreement also covers -






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






30. The value at which an asset is carried on a balance sheet (the cost of the item)






31. Term sheet for equity offering






32. The valuation of a company immediately after the most recent round of financing. For example - a venture capitalist may invest $3.5 million in a company valued at $2 million 'pre-money' (before the investment was made). As a result - the startup will






33. This refers to a public offering subsequent to an initial public offering. A secondary public offering can be either an issuer offering or an offering by a group that has purchased the issuer's securities in the public markets.






34. Are the means by which an investor preserves its percentage of ownership in the company without having to make a new investment.






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






36. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.






37. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)






38. 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






39. 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






40. Allows the holder to choose whether a merge or sale will be treated as a liquidation event for the purpose of receiving the funds they are entitled to under the liquidation preferences of the term sheet






41. A request from the GPs requiring each limited partner to deliver a portion of their capital commitment. Usually specified as a percentage of the capital commitment

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42. The reorganization of a company's capital structure. A company may seek to save on taxes by replacing preferred stock with bonds in order to gain interest deductibility.






43. A form of equity ownership in a corporation that contains preferences over common stock - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights






44. 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






45. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.






46. 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






47. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything






48. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)






49. 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






50. Cash - stock and other property by the company to the investor in the investor's capacity as a stock - payment to owner for their appreciation