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Exam 13: Sources of Financing: Debt and Equity

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Question 111

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To qualify for a Rule 147 (intrastate) public stock offering,a company must ________ in the state in which it makes this offering.

A) be incorporated and maintain its executive offices
B) derive 80 percent of its revenue
C) use 80 percent of the offering proceeds for business
D) All of the above

E) B) and C)
F) C) and D)

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Question 112

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The Tanning Parlor is in the middle of the busy season.Owner Sunny Bright has hired extra help and encountered some unexpected repairs that have left her short of operating capital.What type of financing would Sunny most likely use in this situation?

A) A line of credit
B) Floor planning
C) A discounted installment contract
D) Trade credit

E) A) and D)
F) A) and B)

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Question 113

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Commercial banks are primarily lenders of short-term capital to small businesses,although they will make certain intermediate and long-term loans,normally requiring the loan to be secured by collateral.

What might Christine do to convince a bank to lend her the money she needs to launch her company?

A boat retailer would most likely use a line of credit to finance the purchase of her inventory.

The goal of the SEC's Regulation S-B is:

After an entrepreneur invests his own money for startup,he or she will typically seek additional financing from friends and family next.

Publicly held companies must file periodic reports with the Securities and Exchange Commission.

A program offered by communities that combine private and public funds to make loans to small businesses,often at favorable interest rates,is the:

Because small businesses typically borrow small amounts of money,they pay interest rates below the "prime rate."

Approximately ________ to ________ percent of all venture capital invested comes from corporations.

Venture capital companies invest only in companies in the startup phase.

If an entrepreneur needs a relatively small amount of money to launch a company,angels are a primary source of funds.

Angels are not a good source of financing for entrepreneurs seeking relatively small amounts of money,as they typically do not make investments of less than $1 million.

The purpose of the road show coordinated by the underwriter of an initial public offering (IPO)is to promote interest in the IPO among potential syndicate members.

Venture capital companies reject 90 percent of the proposals they receive because they don't meet the firms' investment criteri a.