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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. 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






2. 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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3. 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.






4. 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.).






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






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






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






8. 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






9. This refers to obtaining capital from investors or venture capital sources.






10. 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






11. The way you buy stock






12. 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






13. 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






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






15. 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.






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






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






18. An IPO that has met certain






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






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






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






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






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






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






25. Pre-money valuation plus the amount invested in the latest round






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






27. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.






28. 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.






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






30. 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.






31. 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






32. 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






33. 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






34. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity






35. No double tax - Limited number of investors






36. 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






37. 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.






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






40. 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






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






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






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






44. 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






45. 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 -






46. 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






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






48. 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.






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






50. 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






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