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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. 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.






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






3. 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 -






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






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






6. 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.






7. 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






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






9. Compound internal rate of return.






10. A security with limits on its transferability. Usually issued in connection with a private placement






11. 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






12. 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.






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






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






15. Letter of intent summarizing the key legal and financial terms






16. 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






17. 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






18. The internal rate of return on an investment.






19. Term sheet for equity offering






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






21. 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






22. 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.






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






24. 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.






25. The way you buy stock






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






27. 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






28. Assets are subject to double taxation - Unlimited number of investors






29. 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






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






31. Selling an interest in your business to an outside party to raise money.






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






33. 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






34. The amount to be paid when the company is liquidated or sold before any payments are made lower classes of investors. Not everyone gets paid equally






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






36. A subsequent investment made by an investor who has made a previous investment in the company - generally a later stage investment in comparison to the initial investments.






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






38. First to absorb losses. Represents common shareholders' investment in a company. It includes common stock value - retained earnings - capital surplus.






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






40. Investments by a private equity fund in a publicly traded company - usually at a discount.






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






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






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






44. The company or entity into which a fund invests directly.






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






46. 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






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






48. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.






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. A study of the background and financial reliability of the company - management team and industry.







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