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Test your basic knowledge |
Venture Capital
Start Test
Study First
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. 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
institutional investors
General Partner (GP)
lock-up period
private equity
2. How much the company is worth before an investment
Deal Structure
Market Capitalization
Pre-Money Valuation
lead investor
3. Don't talk to the market about the company
Confidentiality
Limited Partner
exit route
Capital Call 'Drawdown'
4. The rate of return or profit that an investment is expected to earn.
equity offerings
Venture Capitalist
Bridge Financing
Internal Rate of Return
5. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
private equity
Membership Interest
leverage buy-out(LBO)
capital under management
6. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.
exit route
secondary purchase
Restricted Shares
capital under management
7. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.
Angel Financing
Limited Partnership Agreement
return on investment (ROI)
private equity
8. 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
Restricted Stock
Closing
Pre-Money Valuation
Conversion Rights
9. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.
term sheet
due diligence
Post-Money Valuation
Liquidity Event
10. How you get to vote
raising capital
bridge loans
Voting Rights
Private Equity
11. 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
follow-on
Pre-Money Valuation
management buy-in (MBI)
Liquidation Preference
12. 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
acquisition
IRR
Common Stock
Term Sheet
13. 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.
Subordinated Debt
syndication
term sheet
buyout
14. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
Stock Price Agreement
acquisition
Venture Capital Financing
closing
15. The total value of the company immediately prior to the latest round of financing
private investment in public equities (PIPE)
Pre-money valuation
Anti-Dilution Protections
Limited Partner
16. 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
Limited Partner
Outstanding Stock
Stock Price Agreement
IPO (Initial Public Offering)
17. 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.
lock-up period
Preferred Stock
Bootstrapping
capital gain
18. 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
institutional investors
Venture Capitalist
Conversion Rights
acquisition
19. 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.
Pre-Money Valuation
follow-on
small business investment companies (SBIC)
Membership Interest
20. 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
equity offerings
benchmarks
Book Value
management buy-out (MBO)
21. The residual ownership in a company like a corporation or LLC 51%=control
Term Sheet
turnaround
Equity
S Corporation
22. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)
Liquidity Event
capital gain
institutional investors
Term Sheet
23. How you get out
Liquidation Preference
going private
Book Value
Venture Capital Financing
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.
Common Stock
Subordinated Debt
going private
management buy-out (MBO)
25. 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.
Restricted Stock
acquisition
exit route
Cash-out election
26. The method by which an investor will realize an investment.
exit route
Due Diligence
Pre-money valuation
Market Capitalization
27. The repurchasing of all of a company's outstanding stock by employees or a private investor. As a result of such an initiative - the company stops being publicly traded. Sometimes - the company might have to take on significant debt to finance the
going private
Due Diligence
PPM
management buy-in (MBI)
28. An extremely concise presentation of an entrepreneur's idea - business model - company solution - marketing strategy - and competition delivered to potential investors. Should not last more than a few minutes - or the duration of an elevator rid
series a preferred stock
Elevator Pitch
Pre-Money Valuation
bridge loans
29. 'I will buy stock at price we negotiate'
Market Capitalization
Equity
Stock Price Agreement
closing
30. The party that manages a limited partnership and is liable for the debts of the company
limited partnerships
NDA (Non-disclosure agreement)
General Partner (GP)
Capital Call 'Drawdown'
31. The internal rate of return on an investment.
Common Stock
return on investment (ROI)
small business investment companies (SBIC)
limited partnerships
32. 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
Capitalization Table
Pre-money valuation
private equity
Private Equity
33. 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.
S Corporation
buyout
Pre-Money Valuation
term sheet
34. 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
Burn Rate
Market Capitalization
General Partner (GP)
acquisition
35. Investments by a private equity fund in a publicly traded company - usually at a discount.
PPM
Business Summary
series a preferred stock
private investment in public equities (PIPE)
36. 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.
Warrants
Series A Preferred Stock
Due Diligence
turnaround
37. A study of the background and financial reliability of the company - management team and industry.
Post-Money Valuation
minority enterprise small business investment companies (MESBICS)
Due Diligence
portfolio compaay
38. 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
secondary purchase
Dividends
Venture Capitalist
fund of funds
39. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything
Book Value
seed capital
angel investors
Senior Stock
40. Cannot get other outside investors-No Shop
No Shop/Confidentiality
angel investors
equity offerings
Limited Partner
41. The maximum amount of cash that a partner is required to contribute under the terms
Capital Commitment
Limited Partnership Agreement
portfolio compaay
syndication
42. The rate at which a company expends net cash over a certain period - usually a month.
Capital Commitment
Burn Rate
Post-money
closing
43. 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
Term Sheet
small business investment companies (SBIC)
Post-Money Valuation
Senior Stock
44. The company or entity into which a fund invests directly.
portfolio compaay
secondary public offering
fund of funds
Liquidation Preference
45. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
mezzanine financing
Bootstrapping
debt financing
exit
46. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities
Pre-Money Valuation
Post-Money Valuation
Liquidation
Seed Money
47. 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.
Deal Structure
Term Sheet
Pre-money valuation
bridge loans
48. 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
Post-Money Valuation
equity financing
Business Plan
turnaround
49. 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.
acquisition
Deal Structure
Venture Capitalist
minority enterprise small business investment companies (MESBICS)
50. 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
Stock Price Agreement
Bridge Financing
bridge loans
Capital