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






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






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






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






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






6. 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 -






7. 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






8. The value at which an asset is carried on a balance sheet (the cost of the item)






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






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. 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.






12. The way you buy stock






13. 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






14. The rate at which a company expends net cash over a certain period - usually a month.






15. 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






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






17. The valuation of a company prior to a round of investment. This amount is determined by using various calculation models - such as discounted P/E ratios multiplied by periodic earnings or a multiple times a future cash flow discounted to a present c






18. 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






19. 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.






20. 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






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






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






24. The internal rate of return on an investment.






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






26. 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






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






28. 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.






29. 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






30. 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






31. 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.






32. 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.






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






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






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






36. 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.






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






38. 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.).






39. 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






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






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






42. 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






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






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






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






46. 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






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






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






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






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