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






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






3. Term sheet for equity offering






4. A form of equity ownership in a corporation that contains preferences over common stock - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights






5. 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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6. 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






7. A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. This is a template that is used to develop more detailed legal documents.






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






9. 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.






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






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






12. 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






13. 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.






14. 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.






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






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






17. 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.






18. The internal rate of return on an investment.






19. 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






20. No double tax - Limited number of investors






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






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






23. 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






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






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






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






27. 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






28. How much the company is worth before an investment






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






30. 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.






31. The method by which an investor will realize an investment.






32. 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






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






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






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






36. 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.






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






38. An IPO that has met certain






39. How you get to vote






40. 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.






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






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






43. 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






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






45. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything






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






47. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last






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






49. 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.






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