ch. - Chapter 9 Capital Valuation and Exit Strategies...

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Chapter 9: Capital, Valuation, and Exit Strategies MULTIPLE CHOICE 1. An elevator speech is called so because ____. a. The speech is made from a higher elevation compared to where the listeners are standing b. The speech is made in about 20 seconds or less which is the time taken to ride an elevator c. It goes on as slow as an elevator d. It makes people get to work immediately ANS: B An elevator speech is a brief statement of the company and its goals that can be delivered in about 20 seconds or less—the time it takes to ride several floors in an elevator. REF: 9-1 2. Why should an entrepreneur be ready always with an elevator speech? a. So that he/she does not miss an opportunity to attract the potential visitor b. Because he/she needs to motivate his/ her employees c. Because he/she may forget small details of his own company d. Because he/she will have to keep reminding his subordinates or partners lest they forget some details about the company ANS: A Entrepreneurs should have an elevator speech because they never know when they may be introduced to someone who might be able to provide crucial resources for the venture. REF: 9-1 3. Retained earnings, additional contributions of the owners, adding new partners, stock issues to the general public etc. are sources of ____. a. Market cap b. Loans c. Debt capital d. Equity capital ANS: D Sources of equity capital include retained earnings, or earnings that the owners do not pay to themselves but rather leave in the firm as an additional investment; additional contributions of the owners, that is, additional money from the owners’ personal sources; investments by outsiders in a privately owned firm, that is, adding new partners to bring in new capital; and stock issues to the general public, or stock sold to the public for capital. REF: 9-2 4. Short-term debt, used to finance current operations, has to be paid back ____. a. In 6 months b. In 1 year c. As soon as the first profit is received d. In two years ANS: B Short-term debt is used to finance current operations, with required payback within one year.
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REF: 9-2a 5. A loan below ____ is called a micro loan. a. $50,000 b. $100,000 c. $10,000 d. $200,000 ANS: B A micro-loan is defined as a loan under $100,000. REF: 9-2a 6. Unsecured loans are loans based solely on the good credit of the ____. a. Guarantor b. Lender c. Borrower d. Referral ANS: C Unsecured loans are loans based solely on the good credit of the borrower. REF: 9-2a 7. A company takes a secured loan of $300,000. Which of the following is the most likely value of the collateral? a. $450,000 b. $100,000 c. $300,000 d. $600,000 ANS: C Secured loans are backed by collateral, which is usually something of equal or near equal value to the loan amount. REF:
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This note was uploaded on 01/31/2011 for the course ENTR 3310 taught by Professor Ortega during the Fall '08 term at University of Houston.

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ch. - Chapter 9 Capital Valuation and Exit Strategies...

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