Entrepreneurship- Chapter 10 Exam Questions and Correct Answers Latest Update 2024 (Already Passed)

Entrepreneurship- Chapter 10 Exam Questions and Correct Answers Latest Update 2024 (Already Passed) inDinero, the company profiled in the opening feature for Chapter 10, is described by its cofounders as "the fastest way for small businesses to manage their finances." Which of the following is not true about inDinero's founding story? A) In 2009, inDineor's founders applied to TechStars, which is a Boulder, CO-based seed-stage fund/incubator, and were turned down. B) The idea for inDinero originated in mid-2009 while its cofounders were still in college. C) In April 2010, the founders of inDinero applied to Y Combinator, an organization that provides seed-stage funding, mentorship, and networking opportunities to participants, and were turned down. D) inDinero reportedly has over 15,000 users . E) In late 2009 and early 2010, the founders of inDinero tried to raise angel funding and were unsuccessful. - Answers C According to the textbook, many entrepreneurs go about the task of raising capital haphazardly because: A) they are uncomfortable talking about money and they haven't written a business plan B) they lack experience in this area and because they don't know much about their choices C) they are focused on the nuts and bolts of starting their business D) they haven't completed a feasibility analysis or business plan E) they are intimidated by the process and they are unsure of how much money they need - Answers B Kimberly Jones is the founder of a company in the medical equipment industry. Kimberly's firm is still in the feasibility analysis stage and doesn't have a product that is ready to sell. The company is spending about $25,000 per month and expects to maintain that level of spending until it reaches profitability. The $25,000 a month is Kimberly's: A) consumption rate B) utilization rate C) burn rate D) usage rate E) liquidity rate - Answers C The three reasons startups need funding are: A) cash flow challenges, capital investments, and lengthy product development cycles B) business research, cash flow challenges, and costs associated with building a brand C) bonuses for members of the new venture team, attorney fees, and lengthy product development cycles D) attorney fees, capital investments, and marketing research E) bonuses for members of the new venture team, marketing research, and personnel costs - Answers A In startup firms, inventory must be purchased, employees must be trained and paid, and advertising must be paid for before cash is generated from sales. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example? A) cash flow challenges B) marketing costs C) personnel costs D) capital investments E) lengthy product development cycles - Answers A For startup firms, the cost of buying real estate, building facilities, and purchasing equipment often exceeds the firm's ability to provide funds for those needs on its own. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example? A) lengthy product development cycles B) costs associated with building a brand C) cash flow challenges D) capital investments E) personnel costs - Answers D Peter Simmons owns an electronic games company. Although Peter's game designers and programmers are very good, it takes 2-3 years to develop a good electronic game. This example illustrates the need for funding or financing referred to as: A) personnel costs B) marketing costs C) costs associated with building a brand D) lengthy product development cycles E) cash flow challenges - Answers D For startup firms, some products are under development for years before they generate earnings. The upfront costs often exceed a firm's ability to fund these activities on its own. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example? A) cash flow challenges B) marketing costs C) capital investments D) personnel costs E) lengthy product development cycles - Answers E According to our textbook, the seed money that gets a company off the ground typically comes from: A) angel investors B) venture capitalists C) commercial banks D) governmental agencies E) the founders of the firm - Answers E Jason Graham's startup, which is in the electronics industry, was launched on January 1, 2009. However, prior to its formal launch, Jason spent many hours working on his business, particularly during the feasibility analysis stage. The time and effort that entrepreneurs put into their venture, that can't be easily measured from a financial point of view, is referred to as: A) effort equity B) intangible equity C) sweat equity D) worry equity E) fret equity - Answers C According to the textbook, beyond their own funds, the second source of funds for many new ventures is: A) government grants B) business angels C) friends and family D) banks E) venture capital - Answers C Bill and Megan Tempelton are planning to open a smoothie restaurant near a large soccer complex in Greeley, Colorado, and need $75,000 to get started. They have $15,000 of their own money, which leaves $60,000. After getting turned down by a couple of banks, they decided to turn to their relatives and acquaintances for help. Fortunately, they were able to raise the money through a gift from Bill's grandfather, a loan from Megan's parents, and a small investment by Bill's best friend in college, Kevin. The money that an entrepreneur raises in this manner is referred to as: A) friends and family B) bootstrapping C) networking money D) compassion money E) legacy money - Answers A Amy Clark just opened a soup and salad restaurant near Golden Gate Park in San Francisco. Rather than borrow money or raise funds from investors, Amy used her creativity and ingenuity and figured out how to get her business up and running without the need for external funding. Amy is utilizing a technique referred to as: A) networking B) reaching C) scrounging D) prospecting E) bootstrapping - Answers E Which of the following was not identified in the textbook as a common (and sound) bootstrapping strategy? A) coordinate purchases with other businesses B) hire interns C) minimize personal expenses D) buy rather than lease equipment E) obtain payments in advance from customers - Answers D Equity financing (or funding) means: A) exchanging partial ownership in a firm, usually in the form of stock, for funding B) getting a grant or outright gift C) getting a loan D) getting a lease E) getting a loan guarantee - Answers A Which of the following is not a source of equity funding? A) initial public offering B) angel investors C) private placement D) venture capital E) government grants - Answers E Equity investors typically have a ________ investment horizon. A) 1 to 3 year B) 2 to 4 year C) 3 to 5 year D) 4 to 6 year E) 5 to 7 year - Answers C Which of the following statements is incorrect regarding equity funding?