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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. 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.






2. 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






3. 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.






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






5. 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.






6. 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.






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






8. 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) ...






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






10. An IPO that has met certain






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






12. 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






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






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






15. 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 -






16. 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






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






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






19. 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






20. 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.






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






22. How you get to vote






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






24. 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.






25. 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.






26. 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






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






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






29. 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.






30. 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






31. The internal rate of return on an investment.






32. 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.






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






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






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






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






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






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






39. Compound internal rate of return.






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






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






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






43. 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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44. No double tax - Limited number of investors






45. 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






46. 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






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






48. How you get out






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






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