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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. Used to compute net worth as the difference between total assets and total liabilities. adjusted value up to reflect market value
Adjusted Book Value
Stock Price Agreement
management buy-out (MBO)
Voting Rights
2. Investments by a private equity fund in a publicly traded company - usually at a discount.
capital gain
Voting Rights
private investment in public equities (PIPE)
Liquidation
3. The investigation and evaluation of a management team's characteristics - investment philosophy - and terms and conditions prior to committing capital to the fund.
Liquidation
Preferred Stock
due diligence
Initial Public Offering
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.
term sheet
Angel Financing
Liquidation
turnaround
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
seed capital
follow-on
Bootstrapping
Post-Money Valuation
6. The rate at which a company expends net cash over a certain period - usually a month.
Burn Rate
management buy-in (MBI)
Pre-Money Valuation
series a preferred stock
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
IPO(initial public offerings)
lock-up period
Capital Commitment
Capitalization Table
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
Preferred Stock
Market Capitalization
Equity
Liquidity Event
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.
Bridge Financing
minority enterprise small business investment companies (MESBICS)
Venture Capitalist
recapitalization
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.
Equity
series a preferred stock
Confidentiality
Preferred Stock
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.
recapitalization
Membership Interest
Preferred Stock
Adjusted Book Value
12. Selling an interest in your business to an outside party to raise money.
Term Sheet
equity offerings
equity financing
capital under management
13. How much the company is worth before an investment
syndication
Pre-Money Valuation
debt financing
Cash-out election
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.
Business Plan
Deal Structure
Equity
NDA (Non-disclosure agreement)
15. Document between general and limited partnership of each fund spells out details of the partnership.
Senior Stock
Deal Structure
secondary public offering
Limited Partnership Agreement
16. The rate of return or profit that an investment is expected to earn.
private equity
Internal Rate of Return
Qualified IPO
Deal Structure
17. Purchase of a business by an outside team of managers who have found financial backers and plan to manage the business actively themselves.
management buy-in (MBI)
Conversion Rights
Qualified IPO
lead investor
18. The practice of a large company taking a minority equity position in a smaller company in a related field.
going private
corporate venturing
acquisition
venture capital
19. A study of the background and financial reliability of the company - management team and industry.
follow-on
Term Sheet
Due Diligence
Pre-Money Valuation
20. The internal rate of return on an investment.
bridge loans
return on investment (ROI)
Capitalization Table
corporate venturing
21. A brief statement covering the main points that includes a discussion of management - profits - strategic position - and exit plan
liquidation
secondary purchase
Business Summary
Adjusted Book Value
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
Cash-out election
Limited Partnership Agreement
Burn Rate
Liquidation Preference
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
Common Stock
equity offerings
Private Equity
Closing
24. The equity ownership in a LLC. May be either common or preferred. Partnership agreement
acquisition
Corporation (Limited liability and taxation)
corporate venturing
Membership Interest
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
secondary public offering
Venture Capitalist
lead investor
Due Diligence
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.
PPM
IRR
acquisition
series a preferred stock
27. The equity ownership in a corporation. Also has basic voting rights
Preferred Stock
Bootstrapping
Liquidation Preference
Common Stock
28. An agreement issued by entrepreneurs to potential investors to protect the privacy of their ideas when disclosing those ideas to third parties.
NDA (Non-disclosure agreement)
Common Equity
minority enterprise small business investment companies (MESBICS)
secondary public offering
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
private equity
Subordinated Debt
Conversion Rights
Common Stock
30. Capital raised for a private company from independently wealthy investors. This capital is generally used as seed financing.
Liquidity Event
Senior Stock
Lead Investor
Angel 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.
Liquidation
No Shop/Confidentiality
secondary purchase
Venture Capital Financing
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
Elevator Pitch
Warrants
Confidentiality
Post-money
33. The residual ownership in a company like a corporation or LLC 51%=control
Burn Rate
Capital Commitment
Equity
equity financing
34. Issue of shares of a company to the public by the company (directly) for the first time.
Qualified IPO
IPO(initial public offerings)
lead investor
Business Plan
35. Letter of intent summarizing the key legal and financial terms
exit route
IPO(initial public offerings)
Term Sheet
PPM
36. The way you buy stock
due diligence
Initial Public Offering
acquisition
PPM
37. The final event to complete the investment - at which time all the legal documents are signed and the funds are transferred.
closing
debt financing
institutional investors
Post-Money Valuation
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
bridge loans
capital gain
Cash-out election
liquidation
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
turnaround
Restricted Stock
Common Stock
corporate venturing
40. 'I will buy stock at price we negotiate'
Pre-Money Valuation
Capital Call 'Drawdown'
Preferred Stock
Stock Price Agreement
41. Term sheet for equity offering
small business investment companies (SBIC)
Venture Capital Financing
Limited Partnership Agreement
Term Sheet
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
liquidation
Liquidation Preference
secondary public offering
bridge loans
43. Raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock.
Liquidation
equity offerings
Restricted Shares
Series A 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
Business Plan
Qualified IPO
IPO (Initial Public Offering)
leverage buy-out(LBO)
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.
corporate venturing
turnaround
Liquidation
lock-up period
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
Corporation (Limited liability and taxation)
lock-up period
capital under management
Pre-Money Valuation
47. How fast you can turn it into cash - termination of a business operation by using its assets to discharge its liabilities
Liquidation
Private Equity
Anti-Dilution Protections
corporate venturing
48. How you get out
return on investment (ROI)
Liquidation Preference
General Partner (GP)
Burn Rate
49. The sale or exchange of a significant amount of company ownership for cash - debt - or equity of another company.
Term Sheet
Lead Investor
exit
seed capital
50. Individuals that provide venture capital to seed or early stage companies. They can usually add value through their contracts and expertise.
Restricted Stock
Bridge Financing
angel investors
Book Value