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






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






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






4. 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.






5. 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






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






7. 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






8. 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






9. 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.






10. 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.






11. 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.






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






13. How much the company is worth before an investment






14. 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.






15. Document between general and limited partnership of each fund spells out details of the partnership.






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






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






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






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






20. The internal rate of return on an investment.






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






22. 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






23. 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






24. The equity ownership in a LLC. May be either common or preferred. Partnership agreement






25. 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






26. 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.






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






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






29. 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






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






31. 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.






32. 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






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






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






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






36. The way you buy stock






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






38. 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






39. 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






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






41. Term sheet for equity offering






42. 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






43. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.






44. 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






45. 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.






46. 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






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






48. How you get out






49. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.






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