Mgmt 3850 Chapter 13 Homework Questions And Answes | Correct Answers

MGMT 3850 CHAPTER 13 HOMEWORK QUESTIONS AND ANSWES Essentials of Entrepreneurship & Small Business Mgmt., 7e (Scarborough) Chapter 13 Sources of Financing: Debt and Equity 1) Entrepreneurs needing between $100,000 and $3 million in the current financial environment will likely find acquiring financing to be: A) challenging. B) confusing. C) attainable. D) easy. 2) Unlike entrepreneurs of the past, today's entrepreneurs: A) are finding more government interest and funding for business start-ups than in the past decade. B) find fewer closed doors as small business start-ups have become less risky. C) have to piece their capital together from several sources. D) are spending a smaller percentage of their time raising capital for their businesses. 3) When searching for capital to launch their companies, entrepreneurs should remember several "secrets" to successful financing. Which of the following is not one of those secrets? A) Choosing the right sources of capital can be just as important as choosing the right form of ownership or the right location. B) The money is out there, but the key is knowing where to look. C) Creativity counts when searching for financing. D) Raising money should not take very long; therefore, if it does not come quickly, it probably will not come at all. 4) The Kauffman Foundation reports that the average amount of capital that entrepreneurs use to start small businesses in the U.S. is nearly: A) $25,000. B) $50,000. C) $80,000. D) $100,000. 5) Which of the following represents capital? A) Inventory B) Equipment and machinery C) Cash D) All of the above 6) The primary disadvantage of equity capital is that the entrepreneur: A) must repay it at some point with interest. B) must give up some-perhaps most-of the ownership in the business to outsiders. C) experiences the disadvantage of the risk/return tradeoff in the form of higher interest rates. D) B and C above 7) The primary advantage of equity capital is: A) its lower interest rate. B) that it is readily available to a large number of entrepreneurs from a variety of lenders. C) that it does not have to be repaid like a loan does. D) that it does not appear on a company's balance sheet. 8) Entrepreneurs are most likely to give up more equity in their businesses in the ________ phase of their companies than in any other. A) startup B) product development C) product testing D) product shipping 9) The first place an entrepreneur should look for startup capital is: A) a bank. B) a venture capitalist. C) the Small Business Administration. D) his own savings. 10) A method of raising capital that taps the power of social networking and allows entrepreneurs to post their elevator pitches and proposed investment terms on specialized Web sites and raise money from ordinary people who invest as little as $100 is called: A) crowd funding. B) angel financing. C) venture capital. D) bootstrapping. 11) The largest single source of external equity capital for small businesses is: A) angels. B) venture capitalists. C) Small Business Administration loans. D) the stock market; i.e., "going public." 12) When looking for an angel, the key is: A) networking. B) waiting until you need the money. C) looking across industries. D) using computer matches. 13) Angels are an excellent source of ________ money, often willing to wait ________ years or longer to cash out their investment. A) immediate; 5 B) patient: 7 C) long-term; 10 D) passive; 20 14) The general trend of angel financing is that it has ________ as a source of capital for entrepreneurs over the past 9 years. A) increased B) stabilized C) decreased D) disappeared 15) Which of the following is not a characteristic of a typical angel investor? A) Investing money locally B) Purchasing majority ownership in the company C) Investing in the startup phase of the company D) Willing to wait seven years or more to cash out an investment