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Venture Capital

Subject : industries
  • 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. 'I will buy stock at price we negotiate'

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

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

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

5. 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

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

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

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

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

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

12. 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

13. How much the company is worth before an investment

14. 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.

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

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

17. 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.

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

19. How you get out

20. Compound internal rate of return.

21. 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

22. 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

23. 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.).

24. The amount to be paid when the company is liquidated or sold before any payments are made lower classes of investors. Not everyone gets paid equally

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

26. Financing for a company expecting to go public usually within 6-12 months; usually so structured to be repaid from proceeds of a public offerings - or to establish floor price for public offer.

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

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

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

30. 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

31. 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

32. 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

33. 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.

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

35. Cash - stock and other property by the company to the investor in the investor's capacity as a stock - payment to owner for their appreciation

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

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

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

39. How you get to vote

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

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

42. 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

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

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

45. 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

46. 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.

47. The way you buy stock

48. 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.

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

50. The total dollar value of all outstanding shares. Computed as shares multiplied by current price per share. Prior to an IPO - market capitalization is arrived at by estimating a company's future growth and by comparing a company with similar public