Full Test Bank Ch.8 Launching And Financing Your Venture 6e

Chapter 8: Launching and Financing Your Venture

True / False

1. A garage start-up is a myth in today’s world.
2. Credit cards can be used as a source of funding for a new adventure.
3. Outsourcing is a bootstrapping technique.
4. Raising outside funds can be divided into two categories: early seed funding from venture capitalists and growth funding from family and friends.
5. Running out of money is the most common reason for small companies to fail.
6. Micro-loans were introduced initially in 1976.
7. With Micro-loans you must provide personal guarantees.
8. STTR program stands for Student Business Technology Transfer.
9. Most states have programs that provide financial assistance or incentives to small businesses.
10. A minority-owned business is one that is 51 percent or more owned by one or more owners who are either minorities or women.

Short Answer / Fill in the Blank

1. ___________ are a very popular source for start-up capital because they are not as worried about quick profits.
2. _________________ websites provide organizational systems which link new artists, designers, and project initiators with committed supporters who believe in the persons behind the projects strongly enough to provide monetary support.
3. Reward-based, donation-based, equity-based, and loan-based are categories of _______________.
4. __________________ crowdfunding is an extension of equity-based, loan-based, reward-based, and donation-based crowdfunding.
5. Bootstrapping is a type of __________that can reduce costs from the current operation and overhead.
6. Having a source of __________ income while a company is getting started improves the chances of success.
7. In some cases, entrepreneurs use _________ from previous endeavors to invest in their new enterprises.
8. ________ is a form of financing that is usually available to entrepreneurs who are highly motivated and committed to using personal resources to launch a venture.
9. When considering self-funding, carefully consider how much financial ________ you are willing to take.

Multiple Choice

1. Which of the following is NOT a type of crowdfunding?
   1. Organization-based.
   2. Hybrid-based.
   3. Equity-based.
   4. All of the above are categories of crowdfunding.

Ans. A Pages: 203-204

1. Which of the following is the most popular source of funds for first-stage financing?
   1. Small business investment companies
   2. Public equity market
   3. Private venture capital companies
   4. Friends and family
2. Which of the following is not a bootstrapping technique?
   1. No or low rent
   2. Trading intellectual property rights
   3. Angel funding
   4. Outsourcing
3. Leasing expensive equipment may make sense because:
4. You may only need the equipment for a short period.
5. It can be used as a tax write-off.
6. You don’t ever have to give the equipment back.
7. It never makes sense.
8. Contingent litigation is:
9. Sharing the proceeds of litigation with your attorney in exchange for fees.
10. Going to court as a last resort.
11. Settling a case out of court.
12. Only filing a lawsuit if your partner agrees with you.
13. Which of the following is a correct match of description to type of crowdfunding?
    1. Donation-based – obtains funding for long-term company growth in arts and software development.
    2. Equity based - matches personal lenders to small companies.
    3. Reward-based – offers varying benefits to donors at multiple levels of pledged amounts.
    4. Credit-based – provides small pieces of ownership to investors.
14. One of the characteristics of credit- or loan-based crowdfunding is:
    1. The funds do not need to be repaid.
    2. The loaned funds need to be repaid, but without any interest.
    3. The loans provide ownership to the investors.
    4. The platforms match lenders to small companies.
15. Which of the following is a disadvantage of crowdfunding?
    1. Promotion to a large audience/customers.
    2. Regulatory uncertainty.
    3. Accessing the wisdom of the crowd.
    4. Incorporating beta testing.

28. Which of the following is NOT a purpose that micro-loans may be used for?

1. Purchase of equipment
2. Purchase of Machinery
3. Working Capital
4. Weekend get-a-way
5. Typically, debt financing requires:
6. Reduction of short-term assets.
7. Giving up a degree of ownership in the firm.
8. An asset as collateral.
9. Reduction of working capital.
10. Which of the following is not federally supported sources of small company funding?
    1. The SBIR program
    2. SBA loans
    3. EPA programs
    4. The STTR program
11. In Phase Two of the Small Business Innovation Research grant program:
    1. Funds are provided for theoretical research.
    2. No direct funding is provided.
    3. Money is provided to develop prototypes.
    4. Phase one is repeated.
12. Minority-owned business is one that has ______ percent or more owned by a minority.
    1. 10
    2. 25
    3. 51
    4. 90
13. Which of the following is more suitable funding for later stage?
    1. Self-funding
    2. Personally secured bank loans
    3. Family and friends
    4. Government programs
14. Trading intellectual property rights is a type of:
15. Bootstrapping.
16. Part-time working.
17. Moonlighting.
18. Angel investing.
19. Which of the following is NOT a reason the SBA was created?
20. To aid the small business community
21. To protect the small business community
22. To control the small business community
23. To counsel the small business community
24. To qualify for an SBIR grant applicants must:
25. Have been in business for more than 5 years.
26. Have been in business for less than 5 years.
27. Have less than 500 employees.
28. Have more than 500 employees.
29. A company that has no offices, very few employees, and no communication costs is called:
30. Parent Company.
31. Virtual Company.
32. Corporate Company.
33. Self-funding Company.
34. Private lenders that provide funds for your operations using purchase orders as security for the loan is called:
35. Factors.
36. Micro-loans.
37. Bank Loans.
38. Angels.
39. In exchange for getting your purchase orders, suppliers may give you a(n):
40. Invoice.
41. Loan.
42. Line of credit.
43. Micro-loan.
44. Which of the following best describes Phase I of the SBIR Program?
45. A grant of up to $1 million can be awarded
46. This is not a funding stage
47. There is a two-year decline to complete this phase
48. There is a grant award of up to $150,000
49. When considering crowdfunding, the entrepreneur should:
    1. Make certain that the planned campaign meets the platform’s screening rules.
    2. Identify a platform that has performed well for similar companies or projects.
    3. Both a and b.
    4. Neither a or b.
50. Which is true about crowdfunding?
    • 1. Equity crowdfunding is a good choice if the entrepreneur is planning to grow a small company and then sell it to another company.
      2. If several rounds of funding are required over an extended period of time, the entrepreneur should consider donation-based crowdfunding.
      3. Both a and b are true of crowdfunding.
      4. Neither a or b are true of crowdfunding.

43. When family and friends are your main investors, you should:

1. Not disclose any details of your business plan.
2. Only disclose information that they ask about.
3. Disclose all information just as they are a regular investor.
4. Do not do business with family or friends.

44.______________________ is the most common reason for small companies to fail.

a. Running out of money

b. Gaining too few customers

c. Not having patent awarded

d. Not receiving a government grant

1. Which of the following is true about governmental regulation of crowdsourcing?
   1. In the United States, the Securities Exchange Commission regulates security sales and reporting and disclosure requirements for those sales.
   2. The United Kingdom, France and Canada regulate the sales of securities in their respective countries.
   3. Both a and b are true.
   4. Neither a or b are true.