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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. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
exit
Closing
IPO(initial public offerings)
Internal Rate of Return
2. 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.
Equity
return on investment (ROI)
portfolio compaay
acquisition
3. 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
Liquidity Event
Post-Money Valuation
minority enterprise small business investment companies (MESBICS)
due diligence
4. 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
Seed Money
Due Diligence
Warrants
Limited Partnership Agreement
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
Preferred Stock
Closing
Limited Partner
series a preferred stock
6. Force sell of stock at a predetermined price. The rights by which the investor's preferred stock or subordinated debt 'converts' into common stock
General Partner (GP)
buyout
IPO (Initial Public Offering)
Conversion Rights
7. The amount of this available to a management team for venture investments.
limited partnerships
capital under management
Preferred Stock
management buy-out (MBO)
8. A business owned by stockholders who share in its profits but are not personally responsible for its debts
private equity
Corporation (Limited liability and taxation)
Post-money
Term Sheet
9. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last
Subordinated Debt
Conversion Rights
Lead Investor
Capital Commitment
10. 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
Preferred Stock
IPO (Initial Public Offering)
lead investor
Qualified IPO
11. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.
lock-up period
exit route
Common Equity
due diligence
12. The equity ownership in a corporation. Also has basic voting rights
Due Diligence
Common Stock
Deal Structure
Internal Rate of Return
13. Letter of intent summarizing the key legal and financial terms
Pre-Money Valuation
Term Sheet
Bridge Financing
IPO (Initial Public Offering)
14. 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.
Post-money
lock-up period
institutional investors
lead investor
15. The total value of the company immediately prior to the latest round of financing
Pre-money valuation
Preferred Stock
Capital Commitment
Qualified IPO
16. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
Liquidation Preference
Restricted Stock
management buy-in (MBI)
series a preferred stock
17. 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
angel investors
Market Capitalization
Due Diligence
C Corporation
18. When an investor sells a stock - bond or mutual fund at a higher price than he or she paid for it.
capital gain
venture capital
recapitalization
Market Capitalization
19. An IPO that has met certain
Qualified IPO
benchmarks
minority enterprise small business investment companies (MESBICS)
Subordinated Debt
20. 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
private equity
management buy-out (MBO)
Preferred Stock
C Corporation
21. 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.).
Adjusted Book Value
private investment in public equities (PIPE)
Limited Partnership Agreement
institutional investors
22. 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.
buyout
debt financing
No Shop/Confidentiality
turnaround
23. Cannot get other outside investors-No Shop
debt financing
Business Plan
No Shop/Confidentiality
Subordinated Debt
24. 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.
Outstanding Stock
Bootstrapping
General Partner (GP)
Restricted Shares
25. 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.
Pre-money valuation
Pre-Money Valuation
Elevator Pitch
syndication
26. A type of equity ownership in a corporation - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights.
liquidation
Preferred Stock
fund of funds
Restricted Stock
27. The party that manages a limited partnership and is liable for the debts of the company
Stock Price Agreement
General Partner (GP)
acquisition
Lead Investor
28. 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
bridge loans
mezzanine financing
Angel Financing
debt financing
29. Term sheet for equity offering
bridge loans
closing
lead investor
Term Sheet
30. How much the company is worth before an investment
Pre-Money Valuation
Stock Price Agreement
Restricted Stock
Subordinated Debt
31. 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
Internal Rate of Return
Series A Preferred Stock
Preferred Stock
portfolio compaay
32. 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
Membership Interest
Limited Partnership Agreement
syndication
small business investment companies (SBIC)
33. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities
Liquidation
Conversion Rights
Post-Money Valuation
Common Equity
34. The internal rate of return on an investment.
return on investment (ROI)
Pre-Money Valuation
Business Plan
Common Stock
35. 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
Lead Investor
secondary purchase
Conversion Rights
bridge loans
36. Issue of shares of a company to the public by the company (directly) for the first time.
Series A Preferred Stock
Internal Rate of Return
syndication
IPO(initial public offerings)
37. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
S Corporation
closing
Membership Interest
Venture Capitalist
38. 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.
Series A Preferred Stock
recapitalization
Capital Call 'Drawdown'
PPM
39. A form of equity ownership in a corporation that contains preferences over common stock - stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights
Capital Commitment
small business investment companies (SBIC)
Preferred Stock
Seed Money
40. 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
leverage buy-out(LBO)
Pre-Money Valuation
Senior Stock
Business Summary
41. Pre-money valuation plus the amount invested in the latest round
Burn Rate
Post-money
venture capital
leverage buy-out(LBO)
42. 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 -
benchmarks
corporate venturing
secondary public offering
limited partnerships
43. An acquisition of a business using mostly debt and a small amount of equity. The debt is secured by the assets of the business.
Preferred Stock
leverage buy-out(LBO)
Book Value
private equity
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
term sheet
Private Equity
Angel Financing
Bridge Financing
45. A limited amount of equity or short-term debt financing typically raised within 6-18 months of an anticipated public offering or private placement meant to 'bridge' a company to the next round of financing.
Bridge Financing
capital under management
Restricted Stock
Adjusted Book Value
46. 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.
secondary purchase
Business Plan
term sheet
seed capital
47. 'I will buy stock at price we negotiate'
Dividends
Stock Price Agreement
Subordinated Debt
C Corporation
48. 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.
Conversion Rights
Bootstrapping
Subordinated Debt
IPO (Initial Public Offering)
49. Purchase of stock in a company from a share holder - rather than purchasing stock directly from the company.
secondary purchase
seed capital
Business Summary
private investment in public equities (PIPE)
50. The company or entity into which a fund invests directly.
portfolio compaay
Common Equity
C Corporation
Cash-out election