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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 way you buy stock
PPM
Liquidation Preference
Bootstrapping
secondary purchase
2. The internal rate of return on an investment.
return on investment (ROI)
Anti-Dilution Protections
Limited Partnership Agreement
S Corporation
3. The residual ownership in a company like a corporation or LLC 51%=control
syndication
Equity
term sheet
Membership Interest
4. 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.
NDA (Non-disclosure agreement)
Venture Capital Financing
bridge loans
IRR
5. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything
lead investor
Voting Rights
Preferred Stock
Senior Stock
6. 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
follow-on
minority enterprise small business investment companies (MESBICS)
bridge loans
Pre-Money Valuation
7. 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
Conversion Rights
Liquidation Preference
due diligence
8. 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
Post-Money Valuation
Stock Price Agreement
exit route
Capital Commitment
9. The method by which an investor will realize an investment.
Common Equity
follow-on
capital gain
exit route
10. 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
Limited Partnership Agreement
Voting Rights
Pre-Money Valuation
bridge loans
11. 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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12. 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
NDA (Non-disclosure agreement)
Lead Investor
Cash-out election
Liquidation
13. 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
lead investor
raising capital
exit route
Preferred Stock
14. 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.
turnaround
small business investment companies (SBIC)
Deal Structure
IPO(initial public offerings)
15. The company or entity into which a fund invests directly.
Liquidation
private equity
minority enterprise small business investment companies (MESBICS)
portfolio compaay
16. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.
equity financing
liquidation
Lead Investor
Angel Financing
17. 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.
Post-Money Valuation
management buy-out (MBO)
capital gain
raising capital
18. How you get out
Qualified IPO
Capitalization Table
Liquidation Preference
General Partner (GP)
19. 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.
Anti-Dilution Protections
return on investment (ROI)
leverage buy-out(LBO)
syndication
20. 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
Capital Call 'Drawdown'
Angel Financing
Elevator Pitch
Venture Capitalist
21. 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
NDA (Non-disclosure agreement)
Capitalization Table
Equity
seed capital
22. 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
Liquidity Event
Outstanding Stock
Restricted Shares
private equity
23. The practice of a large company taking a minority equity position in a smaller company in a related field.
seed capital
Due Diligence
corporate venturing
acquisition
24. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock
equity financing
Conversion Rights
Limited Partner
Term Sheet
25. An investment vehicle designed to invest in a diversified group of investment funds.
fund of funds
angel investors
Subordinated Debt
institutional investors
26. Corporation's first offer to sell stock to the public - Allows for anyone to buy stock and now falls under the SEC (No longer accredited investor) ...
Equity
Initial Public Offering
Outstanding Stock
Liquidation Preference
27. 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.
Outstanding Stock
angel investors
closing
secondary public offering
28. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.
secondary purchase
term sheet
Preferred Stock
corporate venturing
29. 'I will buy stock at price we negotiate'
Stock Price Agreement
Book Value
Anti-Dilution Protections
Seed Money
30. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Due Diligence
leverage buy-out(LBO)
lead investor
Adjusted Book Value
31. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan
bridge loans
series a preferred stock
Stock Price Agreement
Business Summary
32. 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.).
Series A Preferred Stock
Due Diligence
institutional investors
PPM
33. 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
benchmarks
private equity
debt financing
IPO(initial public offerings)
34. Cannot get other outside investors-No Shop
equity financing
raising capital
series a preferred stock
No Shop/Confidentiality
35. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
Term Sheet
Common Equity
Subordinated Debt
Limited Partnership Agreement
36. The equity ownership in a corporation. Also has basic voting rights
Preferred Stock
Common Stock
Voting Rights
Capital
37. The rate at which a company expends net cash over a certain period - usually a month.
Book Value
closing
seed capital
Burn Rate
38. How much the company is worth before an investment
Burn Rate
Closing
Pre-Money Valuation
lock-up period
39. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
institutional investors
Stock Price Agreement
executive summary
management buy-in (MBI)
40. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
angel investors
Preferred Stock
exit
term sheet
41. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
Senior Stock
Capital Call 'Drawdown'
small business investment companies (SBIC)
Membership Interest
42. The amount of common shares of a corporation which are in the hands of investors. It is equal to the amount of issued shares less treasury stock.
turnaround
Outstanding Stock
Liquidation
Internal Rate of Return
43. 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
Restricted Shares
private investment in public equities (PIPE)
leverage buy-out(LBO)
Cash-out election
44. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity
Book Value
Warrants
going private
Venture Capitalist
45. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)
Book Value
series a preferred stock
Initial Public Offering
Capital
46. This refers to a synopsis of the key points of a business plan.
C Corporation
Cash-out election
Capital
executive summary
47. 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
Post-money
Cash-out election
Anti-Dilution Protections
Private Equity
48. 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
capital under management
Market Capitalization
Qualified IPO
due diligence
49. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
follow-on
Closing
exit
recapitalization
50. 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
exit
turnaround
IPO (Initial Public Offering)