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Test your basic knowledge |
Venture Capital
Start Test
Study First
Subject
:
industries
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
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. The value at which an asset is carried on a balance sheet (the cost of the item)
follow-on
Capitalization Table
secondary purchase
Book Value
2. The rate of return or profit that an investment is expected to earn.
Deal Structure
Pre-money valuation
Adjusted Book Value
Internal Rate of Return
3. Date the LP's subscription is effective and they become partner
debt financing
Closing
institutional investors
secondary public offering
4. Compound internal rate of return.
Conversion Rights
Deal Structure
IRR
Confidentiality
5. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
Pre-money valuation
Limited Partnership Agreement
Liquidity Event
due diligence
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
Equity
Capitalization Table
angel investors
Preferred Stock
7. How much the company is worth before an investment
Pre-Money Valuation
Membership Interest
Post-Money Valuation
liquidation
8. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Adjusted Book Value
Preferred Stock
closing
Series A Preferred Stock
9. The company or entity into which a fund invests directly.
IRR
minority enterprise small business investment companies (MESBICS)
Pre-money valuation
portfolio compaay
10. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.
Preferred Stock
Liquidity Event
Common Equity
capital under management
11. These are short-term financing agreements that fund a company's operation until it can arrange a more comprehensive longer-term financing. The need for these arises when a company runs out of cash before it can obtain more capital investment though l
Dividends
bridge loans
Limited Partner
Preferred Stock
12. The practice of a large company taking a minority equity position in a smaller company in a related field.
Membership Interest
Cash-out election
corporate venturing
syndication
13. Document between general and limited partnership of each fund spells out details of the partnership.
Limited Partnership Agreement
Initial Public Offering
Capital Commitment
follow-on
14. The residual ownership in a company like a corporation or LLC 51%=control
Warrants
bridge loans
Equity
Venture Capitalist
15. A business owned by stockholders who share in its profits but are not personally responsible for its debts
Corporation (Limited liability and taxation)
benchmarks
private equity
private investment in public equities (PIPE)
16. Don't talk to the market about the company
Business Plan
Confidentiality
equity financing
Adjusted Book Value
17. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
capital gain
angel investors
private investment in public equities (PIPE)
Conversion Rights
18. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.
venture capital
Elevator Pitch
secondary purchase
seed capital
19. 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.
mezzanine financing
Bootstrapping
Deal Structure
bridge loans
20. 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
Warrants
Stock Price Agreement
Senior Stock
going private
21. 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.
syndication
acquisition
S Corporation
Anti-Dilution Protections
22. How you get out
return on investment (ROI)
Liquidation Preference
Limited Partner
Anti-Dilution Protections
23. 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
Subordinated Debt
series a preferred stock
No Shop/Confidentiality
small business investment companies (SBIC)
24. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
exit
Internal Rate of Return
Post-Money Valuation
seed capital
25. 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
Membership Interest
going private
Due Diligence
Seed Money
26. 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
Common Stock
Elevator Pitch
Cash-out election
Business Summary
27. 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
Membership Interest
Private Equity
Confidentiality
Conversion Rights
28. 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.
Bridge Financing
recapitalization
follow-on
equity financing
29. Issue of shares of a company to the public by the company (directly) for the first time.
management buy-out (MBO)
IPO(initial public offerings)
Warrants
private investment in public equities (PIPE)
30. Assets are subject to double taxation - Unlimited number of investors
Confidentiality
fund of funds
C Corporation
minority enterprise small business investment companies (MESBICS)
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
Voting Rights
S Corporation
lock-up period
Business Plan
32. 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 -
IPO (Initial Public Offering)
limited partnerships
S Corporation
Senior Stock
33. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities
Liquidation
Bridge Financing
executive summary
Qualified IPO
34. The amount of this available to a management team for venture investments.
capital under management
Seed Money
lead investor
leverage buy-out(LBO)
35. 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.
return on investment (ROI)
lock-up period
Adjusted Book Value
Preferred Stock
36. These are equity securities of companies that have not 'gone public' (in other words - companies that have not listed their stock on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are no
bridge loans
private equity
syndication
due diligence
37. 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
Limited Partner
Cash-out election
equity financing
Bootstrapping
38. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
debt financing
management buy-in (MBI)
going private
follow-on
39. 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
Post-money
venture capital
follow-on
Term Sheet
40. The investor who leads a group of investors into an investment. Usually one venture capitalist will be this when a group of venture capitalists invest in a single business.
lock-up period
lead investor
General Partner (GP)
Adjusted Book Value
41. 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
small business investment companies (SBIC)
leverage buy-out(LBO)
Venture Capital Financing
Elevator Pitch
42. 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
small business investment companies (SBIC)
capital gain
Post-Money Valuation
PPM
43. 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.
Qualified IPO
Outstanding Stock
acquisition
Preferred Stock
44. 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.
limited partnerships
Venture Capital Financing
Bridge Financing
portfolio compaay
45. The way you buy stock
PPM
acquisition
Equity
liquidation
46. An investment vehicle designed to invest in a diversified group of investment funds.
fund of funds
Bootstrapping
Preferred Stock
institutional investors
47. 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
debt financing
Common Stock
leverage buy-out(LBO)
syndication
48. This refers to a synopsis of the key points of a business plan.
Membership Interest
executive summary
seed capital
raising capital
49. 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.
Bridge Financing
capital under management
institutional investors
C Corporation
50. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
capital gain
syndication
closing
Equity