Test your basic knowledge |

Venture Capital

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)






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






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






4. Compound internal rate of return.






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






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. How much the company is worth before an investment






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






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






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






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






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






13. Document between general and limited partnership of each fund spells out details of the partnership.






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






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






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






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






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






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.






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






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.






22. How you get out






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






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






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






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






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






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.






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






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






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






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 -






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






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






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.






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






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






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






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






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.






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






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






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.






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.






45. The way you buy stock






46. An investment vehicle designed to invest in a diversified group of investment funds.






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






48. This refers to a synopsis of the key points of a business plan.






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.






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