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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. 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






2. 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.






3. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.






4. 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






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






6. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock






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






8. 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






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






10. 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






11. 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) ...






12. 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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13. 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.






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






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






16. 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






17. 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.






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






19. The total value of the company immediately prior to the latest round of financing






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






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






22. No double tax - Limited number of investors






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






24. 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






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






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






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






28. 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.






29. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.






30. 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






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






32. Compound internal rate of return.






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






34. 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.






35. 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.






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






37. An IPO that has met certain






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






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






40. 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






41. 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






42. The sale of the assets of a portfolio company to one or more acquirers when venture capital investors receive some of the proceeds of the sale.






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






44. 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.).






45. 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






46. 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






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






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. 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







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