FIN 300 Exam 4 Question and answers
verified to pass 2025
bootstrapping - correct answer ✔the process by which many entrepreneurs
raise seed money and obtain other resources necessary to start their
businesses
*usually lasts no more than 2 years*
seed money/financing - correct answer ✔money allocated to initiate a
project. usually comes from the entrepreneurs or founders. other cash may
come from selling assets (boats/cars) or from personal savings.
venture capitalists - correct answer ✔individuals or firms that invest by
purchasing equity in new businesses and often provide entrepreneurs with
advice.
angels (angel investors) - correct answer ✔individual venture capitalists.
wealthy individuals who invest their own money in new ventures.
3 reasons why traditional sources of funding do not work for new or emerging
businesses - why venture funding is different - correct answer ✔-high degree
of risk involved (most businesses fail)
-types of productive assets (firms with tangible vs intangible assets are easier
for lenders to invest in)
-information asymmetry problems (when 1 party has more information than
the other)
staged funding - correct answer ✔each stage gives venture capitalists an
opportunity to reassess the management team and the firms financial
performance.
, personal investment - correct answer ✔venture capitalists often require the
entrepreneur to make a substantial personal investment in the business - by
investing your own money you confirm your confidence in the business and
high motivation for it to succeed.
syndication - correct answer ✔occurs when original venture capitalist sells a
percent of a deal to other venture capitalists.
syndication reduces risk by - correct answer ✔1) other parties have more of
the deal so the original venture capitalist will have less $ invested.
2) willingness of others to invest proceed independent corroboration that the
investment is a good decision.
exit strategies - correct answer ✔venture capitalists are not long-term
investors in the companies they back. they stay with a firm until it is successful
(usually 3-7 years)
-can be controversial bc venture capitalist and other owners won't always
agree
3 forms of exit strategies - correct answer ✔1) selling to strategic buyer
2) selling to financial buyer
3) offering stock to the public (IPO)
difference between strategic and financial buyouts - correct answer
✔financial buyout does not expect to gain from operating or marketing
synergies. financial buyers focus on creating value and if the firm performs
poorly will bring in a new management team to increase value then sell.
strategic buyer is buying it for good to keep and increase their value.
verified to pass 2025
bootstrapping - correct answer ✔the process by which many entrepreneurs
raise seed money and obtain other resources necessary to start their
businesses
*usually lasts no more than 2 years*
seed money/financing - correct answer ✔money allocated to initiate a
project. usually comes from the entrepreneurs or founders. other cash may
come from selling assets (boats/cars) or from personal savings.
venture capitalists - correct answer ✔individuals or firms that invest by
purchasing equity in new businesses and often provide entrepreneurs with
advice.
angels (angel investors) - correct answer ✔individual venture capitalists.
wealthy individuals who invest their own money in new ventures.
3 reasons why traditional sources of funding do not work for new or emerging
businesses - why venture funding is different - correct answer ✔-high degree
of risk involved (most businesses fail)
-types of productive assets (firms with tangible vs intangible assets are easier
for lenders to invest in)
-information asymmetry problems (when 1 party has more information than
the other)
staged funding - correct answer ✔each stage gives venture capitalists an
opportunity to reassess the management team and the firms financial
performance.
, personal investment - correct answer ✔venture capitalists often require the
entrepreneur to make a substantial personal investment in the business - by
investing your own money you confirm your confidence in the business and
high motivation for it to succeed.
syndication - correct answer ✔occurs when original venture capitalist sells a
percent of a deal to other venture capitalists.
syndication reduces risk by - correct answer ✔1) other parties have more of
the deal so the original venture capitalist will have less $ invested.
2) willingness of others to invest proceed independent corroboration that the
investment is a good decision.
exit strategies - correct answer ✔venture capitalists are not long-term
investors in the companies they back. they stay with a firm until it is successful
(usually 3-7 years)
-can be controversial bc venture capitalist and other owners won't always
agree
3 forms of exit strategies - correct answer ✔1) selling to strategic buyer
2) selling to financial buyer
3) offering stock to the public (IPO)
difference between strategic and financial buyouts - correct answer
✔financial buyout does not expect to gain from operating or marketing
synergies. financial buyers focus on creating value and if the firm performs
poorly will bring in a new management team to increase value then sell.
strategic buyer is buying it for good to keep and increase their value.
