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Venture Capital

Subject : industries
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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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. 'IOU' for stock - form of equity similar to option allowing the Warrant holder to exercise the Warrant and obtain equity

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

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

4. 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.

5. Shares acquired in a private placement are considered restricted shares and may not be sold in a public offering absent registration - or after an appropriate holding period has expired. Non-affiliates must wait one year after purchasing the shares

6. 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

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

8. 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.

9. 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

10. 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

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

12. Corporation's first offer to sell stock to the public - Allows for anyone to buy stock and now falls under the SEC (No longer accredited investor) ...

13. 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.

14. 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.

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

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

17. 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.

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

19. Cannot get other outside investors-No Shop

20. 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

21. Money used to purchase equity-based interest in a new or existing company. A venture capitalists return usually comes from preferred stock - a share of profits - royalties or capital appreciation of common stock. Most venture capitalists look for c

22. 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

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

24. No double tax - Limited number of investors

25. 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.

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

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

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

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

30. Funds provided to enable an enterprise to acquire another enterprise or product line or business.

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

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

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

34. Partner who does not share in a firm's management and is liable for its debts only to the limits of said partner's investment

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

36. 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

37. 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.

38. A request from the GPs requiring each limited partner to deliver a portion of their capital commitment. Usually specified as a percentage of the capital commitment

39. 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.

40. 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

41. How you get to vote

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 -

43. Compound internal rate of return.

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

45. The method by which an investor will realize an investment.

46. 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

47. Also known as a bell cow investor. Member of a syndicate of private equity investors holding the largest stake - in charge of arranging the financing and most actively involved in the overall project

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

49. 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.

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