CA VEE FINANCE - CHAPTER 1 EXAM.FINAL TEST 2026\2027.
Parker had a brilliant idea and started a firm. The firm is in its earliest stages of the lifecycle.
Parker then decides to raise capital from external sources.
Which source of funding will Parker most likely rely on?
A: Angel investors
B: Venture capital firms
C: Private equity firms
D: Institutional investors
E: Corporate investors
A: Angel investors
Determine which of the following statements regarding venture capital financing terms is TRUE.
A: When a company founder decides to sell equity to outside investors for the first time, it is
common practice for private companies to issue common stock to raise capital.
B: The preferred stock issued by young companies typically pay regular cash dividends to the
owner.
C: If the company runs into financial difficulties, the common stockholders have a senior claim on
the assets of the firm relative to any preferred stockholder.
D: It is uncommon for investors in later rounds to demand seniority over investors in earlier
rounds.
E: If things are not going well and the firm raises new funding at a lower price than in a prior
round, it is referred to as a "down round."
E: If things are not going well and the firm raises new funding at a lower price than in a prior round, it is
referred to as a "down round."
Determine which of the following statements about equity financing is FALSE.
A: Convertible notes allow angel investors to convert into equity at a discount when the company
finances with equity for the first time.
B: Venture capital firms are run by their general partners.
C: General partners in venture capital firms are also called venture capitalists.
D: The annual management fee that venture capital firms typically charge is known as carried
interest.
, CA VEE FINANCE - CHAPTER 1 EXAM.FINAL TEST 2026\2027.
E: A leveraged buyout is a transaction in which private equity firms initiate their investment by
finding a publicly traded firm and purchasing the outstanding equity, thereby taking the company
private. In most cases, the private equity firms use debt as well as equity to finance the purchase.
D: The annual management fee that venture capital firms typically charge is known as carried interest.
Determine which of the following statements regarding equity financing for private companies is
TRUE.
A: Angel financing often occurs at such an early stage in the business that it is difficult to assess
a value for the firm. Angel investors often circumvent this problem by holding equity.
B: A venture capital firm is a general partnership that specializes in raising money to invest in the
private equity of young firms.
C: A venture capital firm is run by the limited partners.
D: Private equity firms often initiate their investment by finding a publicly traded firm and
purchasing the outstanding equity, thereby taking the company private in a transaction called a
leveraged buyout.
E: Corporate investors will only invest in companies for the financial return that they will earn on
their investments.
D: Private equity firms often initiate their investment by finding a publicly traded firm and purchasing the
outstanding equity, thereby taking the company private in a transaction called a leveraged buyout.
Coaching Actuaries is going public using an auction IPO. The following are the bids:
Price: Number of Shares:
10.00 200,000
9.75 100,000
9.50 275,000
9.25 30,000
9.00 150,000
8.75 200,000
8.50 50,000
8.25 30,000
Assume Coaching Actuaries would like to sell 1 million shares in its IPO.
Let X be the amount of capital raised and Y be the number of shares sold to those who bid 8.50.
Determine X and Y.
Parker had a brilliant idea and started a firm. The firm is in its earliest stages of the lifecycle.
Parker then decides to raise capital from external sources.
Which source of funding will Parker most likely rely on?
A: Angel investors
B: Venture capital firms
C: Private equity firms
D: Institutional investors
E: Corporate investors
A: Angel investors
Determine which of the following statements regarding venture capital financing terms is TRUE.
A: When a company founder decides to sell equity to outside investors for the first time, it is
common practice for private companies to issue common stock to raise capital.
B: The preferred stock issued by young companies typically pay regular cash dividends to the
owner.
C: If the company runs into financial difficulties, the common stockholders have a senior claim on
the assets of the firm relative to any preferred stockholder.
D: It is uncommon for investors in later rounds to demand seniority over investors in earlier
rounds.
E: If things are not going well and the firm raises new funding at a lower price than in a prior
round, it is referred to as a "down round."
E: If things are not going well and the firm raises new funding at a lower price than in a prior round, it is
referred to as a "down round."
Determine which of the following statements about equity financing is FALSE.
A: Convertible notes allow angel investors to convert into equity at a discount when the company
finances with equity for the first time.
B: Venture capital firms are run by their general partners.
C: General partners in venture capital firms are also called venture capitalists.
D: The annual management fee that venture capital firms typically charge is known as carried
interest.
, CA VEE FINANCE - CHAPTER 1 EXAM.FINAL TEST 2026\2027.
E: A leveraged buyout is a transaction in which private equity firms initiate their investment by
finding a publicly traded firm and purchasing the outstanding equity, thereby taking the company
private. In most cases, the private equity firms use debt as well as equity to finance the purchase.
D: The annual management fee that venture capital firms typically charge is known as carried interest.
Determine which of the following statements regarding equity financing for private companies is
TRUE.
A: Angel financing often occurs at such an early stage in the business that it is difficult to assess
a value for the firm. Angel investors often circumvent this problem by holding equity.
B: A venture capital firm is a general partnership that specializes in raising money to invest in the
private equity of young firms.
C: A venture capital firm is run by the limited partners.
D: Private equity firms often initiate their investment by finding a publicly traded firm and
purchasing the outstanding equity, thereby taking the company private in a transaction called a
leveraged buyout.
E: Corporate investors will only invest in companies for the financial return that they will earn on
their investments.
D: Private equity firms often initiate their investment by finding a publicly traded firm and purchasing the
outstanding equity, thereby taking the company private in a transaction called a leveraged buyout.
Coaching Actuaries is going public using an auction IPO. The following are the bids:
Price: Number of Shares:
10.00 200,000
9.75 100,000
9.50 275,000
9.25 30,000
9.00 150,000
8.75 200,000
8.50 50,000
8.25 30,000
Assume Coaching Actuaries would like to sell 1 million shares in its IPO.
Let X be the amount of capital raised and Y be the number of shares sold to those who bid 8.50.
Determine X and Y.
