ENTR 460 EXAM STUDY GUIDE
Quiz 6: For a new venture, the costs of capital, where possible, should be incorporated
into evaluations, projections, and strategy - Answer TRUE - Helps give a better picture
of what is going on within the business
Quiz 6: The cost of a venture's debt is fully reflected in its financial statements - Answer
TRUE - Debt can be fully represented on financial statements
Quiz 6: The cost of a venture's equity is fully reflected in its financial statements -
Answer FALSE - Not all aspects of equity are represented
Quiz 6: The interest rate is the price paid to borrow funds - Answer TRUE - Interest is the
only reason people would be able to borrow funds
Quiz 6: Early-stage ventures by their very nature usually can tap into public market
financial instruments - Answer FALSE - Early-stage ventures do not have the resources
or the trust to access these markets
Quiz 6: As demand decreases for financing, the interest rate can be expected to
increase. - Answer FALSE - If less people want financing, financers are going to lower
interest rates to encourage financing
Quiz 6: As the perceived default risk for a loan increases, the interest rate can be
expected to decrease. - Answer FALSE - If there is a higher default risk for the lender,
there should be greater reward.
Quiz 6: The prime rate is the interest rate charged by banks to their lowest quality
(highest default risk) business customers. - Answer FALSE - The prime rate is offered to
the highest quality customers, all other customers will receive a higher price
Quiz 6: Investment risk of loss is the chance or probability of financial loss from a
venture investment. - Answer TRUE - Risk of loss is the probability of loss
Quiz 6: Liquidity premium is the premium charged when a debt instrument cannot be
converted to cash quickly as its existing value. - Answer TRUE - Liquidity minimizes risk
to a lender because they could get cash from assets if needed. If your assets cannot be
converted to cash, the lender is taking on more risk, meaning they should charge the
customer a higher rate.
Quiz 7: Broadly speaking, any investment or financial instrument can be considered a
security if money is invested in a common enterprise where profits are dependent on the
efforts of others. - Answer TRUE - Securities are defined as investing your money into
something separate from yourself where the returns are dependent on others,
Quiz 7: 1911 Kansas regulated the sale of investments, it wanted to prevent investments
that promised rain but only delivered "blue sky" - Answer TRUE
, Quiz 7: Securities Act of 1933 addresses security fraud, requires formally register
securities with federal government, and the nature and authority of the National Labor
Relations Board - Answer FALSE
Quiz 7: The JOBS act of 2012 Title III offers registration exemptions from SEC
regulations for crowdfunding. - Answer TRUE - Crowdfunding does not have to be SEC
registered
Quiz 7: The SEC and the Office of Kansas Securities Commission (OKSC) consider
ownership interests in LLCs to be securities - Answer TRUE
Quiz 7: A securities offering in a Kansas-registered LLC is considered by both the SEC
and the Office of Kansas Securities Commission as a class of securities exempt from
registration. - Answer FALSE - A Kansas LLC is NOT exempt
Quiz 7: A key consideration under the 1980 SEC vs. Murphy decision regarding
determining a private placement offering for an SEC 4(a)2 transaction exemption is that
the number of offerees must be limited. - Answer TRUE - You must have a limited
number of offerees
Quiz 7: Per the Kansas Limited Offering Exemption, there can be no more than 25
purchasers in Kansas in any 12-month period other than "institutional investors" -
Answer TRUE - You can only have 25 non-institutional investors
Quiz 7: Under the Invest Kansas Exemption, the investment limit for each Kansas
resident is limited to $5,000 in equity or debt securities. - Answer TRUE - $5,000 limit
Quiz 7: Accredited investor has 1. net worth of $5 million 2. Income over $500,000
individually or $750,000 with partner in each of the prior two years. - Answer FALSE -
Much lower than both of those numbers
Quiz 8: Sale projections drive amount, timing of required additional financing for
ventures as they transition into rapid-growth stage. - Answer TRUE - Sales projections
are NEEDED as you move into rapid growth stage to drive amount and timing
Quiz 8: One sales forecasting approach for early-stage ventures is using a top-down
market-driven approach where a components to sum of value of scenario probability
occurrence time sale growth rate is used. - Answer TRUE
Quiz 8: As the venture progresses through its life cycle stages, its sale forecasting
accuracy typically worsens. - Answer FALSE - More data means better predictions
Quiz 8: To increase value, incremental sales increases must lead to incremental overall
profits and free cash flows. - Answer TRUE - Just because you have more sales doesn't
mean you have more profits.
Quiz 8: A Sustainable Sales Growth Rate (SSGR) reflects a sales growth rate where
external financing is used to drive sales growth. - Answer FALSE - SSGR reflects the
sales growth WITHOUT external financing. What can you do without external financing
Quiz 6: For a new venture, the costs of capital, where possible, should be incorporated
into evaluations, projections, and strategy - Answer TRUE - Helps give a better picture
of what is going on within the business
Quiz 6: The cost of a venture's debt is fully reflected in its financial statements - Answer
TRUE - Debt can be fully represented on financial statements
Quiz 6: The cost of a venture's equity is fully reflected in its financial statements -
Answer FALSE - Not all aspects of equity are represented
Quiz 6: The interest rate is the price paid to borrow funds - Answer TRUE - Interest is the
only reason people would be able to borrow funds
Quiz 6: Early-stage ventures by their very nature usually can tap into public market
financial instruments - Answer FALSE - Early-stage ventures do not have the resources
or the trust to access these markets
Quiz 6: As demand decreases for financing, the interest rate can be expected to
increase. - Answer FALSE - If less people want financing, financers are going to lower
interest rates to encourage financing
Quiz 6: As the perceived default risk for a loan increases, the interest rate can be
expected to decrease. - Answer FALSE - If there is a higher default risk for the lender,
there should be greater reward.
Quiz 6: The prime rate is the interest rate charged by banks to their lowest quality
(highest default risk) business customers. - Answer FALSE - The prime rate is offered to
the highest quality customers, all other customers will receive a higher price
Quiz 6: Investment risk of loss is the chance or probability of financial loss from a
venture investment. - Answer TRUE - Risk of loss is the probability of loss
Quiz 6: Liquidity premium is the premium charged when a debt instrument cannot be
converted to cash quickly as its existing value. - Answer TRUE - Liquidity minimizes risk
to a lender because they could get cash from assets if needed. If your assets cannot be
converted to cash, the lender is taking on more risk, meaning they should charge the
customer a higher rate.
Quiz 7: Broadly speaking, any investment or financial instrument can be considered a
security if money is invested in a common enterprise where profits are dependent on the
efforts of others. - Answer TRUE - Securities are defined as investing your money into
something separate from yourself where the returns are dependent on others,
Quiz 7: 1911 Kansas regulated the sale of investments, it wanted to prevent investments
that promised rain but only delivered "blue sky" - Answer TRUE
, Quiz 7: Securities Act of 1933 addresses security fraud, requires formally register
securities with federal government, and the nature and authority of the National Labor
Relations Board - Answer FALSE
Quiz 7: The JOBS act of 2012 Title III offers registration exemptions from SEC
regulations for crowdfunding. - Answer TRUE - Crowdfunding does not have to be SEC
registered
Quiz 7: The SEC and the Office of Kansas Securities Commission (OKSC) consider
ownership interests in LLCs to be securities - Answer TRUE
Quiz 7: A securities offering in a Kansas-registered LLC is considered by both the SEC
and the Office of Kansas Securities Commission as a class of securities exempt from
registration. - Answer FALSE - A Kansas LLC is NOT exempt
Quiz 7: A key consideration under the 1980 SEC vs. Murphy decision regarding
determining a private placement offering for an SEC 4(a)2 transaction exemption is that
the number of offerees must be limited. - Answer TRUE - You must have a limited
number of offerees
Quiz 7: Per the Kansas Limited Offering Exemption, there can be no more than 25
purchasers in Kansas in any 12-month period other than "institutional investors" -
Answer TRUE - You can only have 25 non-institutional investors
Quiz 7: Under the Invest Kansas Exemption, the investment limit for each Kansas
resident is limited to $5,000 in equity or debt securities. - Answer TRUE - $5,000 limit
Quiz 7: Accredited investor has 1. net worth of $5 million 2. Income over $500,000
individually or $750,000 with partner in each of the prior two years. - Answer FALSE -
Much lower than both of those numbers
Quiz 8: Sale projections drive amount, timing of required additional financing for
ventures as they transition into rapid-growth stage. - Answer TRUE - Sales projections
are NEEDED as you move into rapid growth stage to drive amount and timing
Quiz 8: One sales forecasting approach for early-stage ventures is using a top-down
market-driven approach where a components to sum of value of scenario probability
occurrence time sale growth rate is used. - Answer TRUE
Quiz 8: As the venture progresses through its life cycle stages, its sale forecasting
accuracy typically worsens. - Answer FALSE - More data means better predictions
Quiz 8: To increase value, incremental sales increases must lead to incremental overall
profits and free cash flows. - Answer TRUE - Just because you have more sales doesn't
mean you have more profits.
Quiz 8: A Sustainable Sales Growth Rate (SSGR) reflects a sales growth rate where
external financing is used to drive sales growth. - Answer FALSE - SSGR reflects the
sales growth WITHOUT external financing. What can you do without external financing
