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. The internal rate of return on an investment.






2. Term sheet for equity offering






3. 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






4. How you get out






5. 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






6. 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






7. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity






8. The period an investor must wait before selling or trading company shares subsequent to an exit. Usually in an initial public offering this period is determined by the underwriters.






9. 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






10. Cannot get other outside investors-No Shop






11. 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.






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






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






14. 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






15. The maximum amount of cash that a partner is required to contribute under the terms






16. 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.






17. 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






18. 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.






19. 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






20. The event in which the company is liquidated or sold (bankruptcy or sale to a public company)






21. 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






22. 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.).






23. 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.






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.






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






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






27. How much the company is worth before an investment






28. An IPO that has met certain






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






30. The equity of the company and some types of debts (subordinated debt) but generally not senior secured debt (bank loan)






31. 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






32. Assets are subject to double taxation - Unlimited number of investors






33. Most senior form of debt and is usually secured by the assets of the company. Cannot vote on anything






34. 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.






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






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






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






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






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






40. 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






41. The company or entity into which a fund invests directly.






42. 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.






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






44. The way you buy stock






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






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






47. Unsecured debt - junior to senior debt (bank loan) and is senior to common stock and preferred. Gets paid last






48. 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.






49. Date the LP's subscription is effective and they become partner






50. The total value of the company immediately prior to the latest round of financing