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FIN 310 - CHAPTER 1

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Terms in this set (45) Original

Successful entrepreneurs exhibit

which of the following traits?
a. recognize and seize
commercial opportunities
b. economic pessimism
c. tend to be doggedly
optimistic
d. both a and b
e. both a and c

e. both a and c

While one must be careful to

avoid too many generalizations
about entrepreneurial traits or
characteristics, which one of the
following characteristics would
not normally be associated with
successful entrepreneurs?
a. being able to see and seize a
commercial opportunity
b. planning for the venture's
future
c. only being able to see an
opportunity after it ceases to be
one
d. being optimistic about the
venture's success

c. only being able to see an opportunity

after it ceases to be one

About one-half of all newly

created businesses in the U.S. are
dissolved or cease operations
within how many years after
being started?
a. two years
b. four years
c. six years
d. eight years

b. four years

About 60 percent of all newly

created businesses in the U.S. are
dissolved or cease operations
within how many years after
being started?
a. two years
b. four years
c. six years
d. eight years

c. six years

"Fads" are:
a. not predictable
b. have short lives
c. do not involve macro changes
d. all of the above

d. all of the above

Harry Dent documented major

generation waves in the United
States during the twentieth
century in:
a. 1972
b. 1982
c. 1993
d. 2003

c. 1993

"E-commerce" refers to:

a. environmental commerce
b. electronic commerce
c. economic commerce
d. exploratory commerce

b. electronic commerce

8. While entrepreneurial
opportunities come from an
almost unlimited number of
sources, this textbook focuses
on:
a. societal changes
b. demographic changes
c. technological changes
d. crises and bubbles
e. emerging economies and
global changes
f. all of the above

f. all of the above

Indicate the number of principles

of entrepreneurial finance that
are emphasized in this textbook:
a. one
b. three
c. five
d. seven
e. nine

d. seven

Maximizing the value of the

venture to its owners is the
common financial goal of which
of the following?
a. the entrepreneur
b. the debtholders
c. the venture equity investors
d. both a and b
e. both a and c

e. both a and c

Which of the following is

considered to be an "agency"
conflict?
a. owner-manager conflict
b. stockholder-manager conflict
c. stockholder-debtholder
conflict
d. manager-debtholder conflict

a. owner-manager conflict

Which one of the following

possible conflicts of interest is
usually minimized through the
use of equity incentives?
a. owner-manager conflicts
b. owner-employee conflicts
c. manager-employee conflicts
d. manager-debtholder conflicts

a. owner-manager conflicts

Which one of the following

possible conflicts of interest
increases in divergence at
venture gets close to
bankruptcy?
a. owner-manager conflict
b. owner-employee conflict
c. manager-employee conflict
d. manager-debtholder conflict

d. manager-debtholder conflict

Which of the following is not a

life cycle stage of a successful
venture?
a. development stage
b. startup stage
c. survival stage
d. cash cow stage
e. early-maturity stage

d. cash cow stage

Which of the following does not

describe activity during the
venture's life cycle startup
stage?
a. venture's organization
b. venture's development
c. operating cash flows are
generated
d. initial revenue model is put in
place

c. operating cash flows are generated

At which stage of the venture's

life cycle stage is best
characterized by the period
when revenues start to grow and
when cash flows from operations
begin covering cash outflows?
a. survival stage
b. startup stage
c. rapid growth stage
d. early-maturity stage

a. survival stage

Which is not a major source of

start-up financing for a venture's
startup stage?
a. entrepreneur's assets
b. business operations
c. family and friends
d. business angels
e. venture capitalists

b. business operations

Obtaining bank loan, issuing

bonds, and issuing stock is
characteristic of which type of
financing during the venture's life
cycle?
a. seed financing
b. second round financing
c. mezzanine financing
d. seasoned financing
e. liquidity stage financing

d. seasoned financing

During a venture's rapid growth

stage, funds for plant expansion,
marketing expenditures, working
capital, and product or service
improvements is obtained
through?
a. seed financing
b. second round financing
c. mezzanine financing
d. seasoned financing
e. liquidity stage financing

c. mezzanine financing

20. Founder and venture investor

shares are sold to the public
after the initial offering to the
public is called?
a. secondary market transaction
b. secondary stock offering
c. venture offering
d. bridge loan

b. secondary stock offering

Which of the following advise

and assist corporations on the
type, timing, and costs of issuing
new debt and equity securities
and facilitate the sale of firms?
a. brokerage firms
b. venture law firms
c. specialist firms
d. investment banking firms

d. investment banking firms

Which stage in the venture life

cycle is characterized by
creating and building value,
obtaining additional financing,
and examining opportunities?
a. survival stage
b. startup stage
c. rapid growth stage
d. early-maturity stage

c. rapid growth stage

Which of these statements is

correct?
a. The development stage
occurs between the startup and
survival stages of a venture's life
cycle
b. The early-maturity stage is the
final stage of a new venture's
lifecycle
c. Firms typically begin to cover
all expenses with internally-
generated funds during the
survival stage
d. During the startup stage,
revenues grow much more
rapidly than cash expenditures
e. None of the above

b. The early-maturity stage is the final

stage of a new venture's lifecycle

The last three stages of a

successful venture's life cycle
occur in the following order:
a. startup, development, rapid
growth
b. startup, survival, rapid growth
c. survival, rapid growth, early-
maturity
d. development, startup, survival

c. survival, rapid growth, early-maturity

The stage that precedes the

middle stage in a successful
venture's life cycle is called the:
a. rapid growth stage
b. early-maturity stage
c. development stage
d. survival stage
e. startup stage

e. startup stage

During the maturity stage of a

venture's life cycle, the primary
source of funds is in the form of:
a. mezzanine financing
b. seed financing
c. startup financing
d. first round financing
e. seasoned financing

e. seasoned financing

The type of financing that occurs

during the development stage of
a venture's life cycle is typically
referred to as:
a. seed financing
b. startup financing
c. first round financing
d. second round financing
e. mezzanine financing

a. seed financing

Mezzanine financing is
associated with which one of the
following life cycle stages:
a. development stage
b. startup stage
c. survival stage
d. rapid growth stage
e. early-maturity stage

d. rapid growth stage

Entrepreneurial finance is the

application and adaptation of
financial tools and techniques to
an entrepreneurial venture.
Entrepreneurial finance involves:
a. planning
b. funding
c. operations
d. valuation
e. a and d above
f. all of the above

f. all of the above

The first three stages of a

successful venture's life cycle
occur in the following order:
a. development, rapid growth,
survival
b. startup, development, rapid
growth
c. startup, survival, rapid growth
d. survival, rapid growth, early-
maturity
e. development, startup, survival

e. development, startup, survival

The last stage in a successful

venture's life cycle is called the:
a. rapid growth stage
b. early-maturity stage
c. development stage
d. survival stage
e. startup stage

b. early-maturity stage

The type of financing that occurs

during the survival stage of a
venture's life cycle is typically
referred to as the:
a. seed financing
b. startup financing
c. first round financing
d. second round financing
e. mezzanine financing

c. first round financing

Which one of the following

would not be considered a type
of venture financing?
a. seed financing
b. startup financing
c. mezzanine financing
d. liquidity-stage financing
e. seasoned financing

e. seasoned financing

One study of successful

entrepreneurs indicated that a
majority felt that the most
important factor in the long-term
success of their ventures was:
a. being greedy
b. having high ethical standards
c. working hard
d. taking frequent vacations

b. having high ethical standards

Financial markets where

customized contracts or
securities are negotiated,
created, and held with
restrictions on how they can be
transferred are called:
a. private financial markets
b. public financial markets
c. domestic financial markets
d. international financial markets
e. all of the above

a. private financial markets

The time value of money

concept is associated with which
one of the following principles
of entrepreneurial finance:
a. real, human, and financial
capital must be rented from
owners
b. risk and expected reward go
hand in hand
c. while accounting is the
language of business, cash is the
currency
d. it is dangerous to assume that
people act against their own
self-interests

a. real, human, and financial capital must

be rented from owners

The goal of the entrepreneurial

process is to:
a. develop opportunities
b. gather resources
c. manage and build operations
d. create value

d. create value

Which of the following is not

considered to be a mega-trend
in this textbook?
a. societal, demographic, and
technological changes
b. crises and bubbles
c. fads
d. emerging economies and
global changes

c. fads

You have the opportunity of

making a $5,000 investment. The
outcomes one year from now
will be either $4,500 or $6,000
with an equal chance of either
outcome occurring. What is the
expected outcome?
a. $4,500