Entrepreneurial Capital and Funding Quiz
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Entrepreneurial Capital and Funding Quiz

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@CheeryGodel

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Questions and Answers

What is considered the lifeblood of business?

  • Marketing
  • Human Resources
  • Finance (correct)
  • Product Development

    • Which of the following is NOT a reason firms need finance?

  • Develop marketing strategies (correct)
  • Expand the business
  • Start up a business
  • Run the business

    • Why do new businesses have difficulty raising finance?

  • They lack a proven business model (correct)
  • They have too many customers
  • They require lower investment
  • They have established competitors (correct)

    • What is essential for entrepreneurs to secure funding in the current era?

    <p>Thorough understanding of customer requirements</p> Signup and view all the answers

    Which of the following represents a potential risk that lenders consider with start-up businesses?

    <p>Inability to repay borrowed money</p> Signup and view all the answers

    What is implied about funding in the new era?

    <p>Funding is only for those who can demonstrate product value.</p> Signup and view all the answers

    What do current funding practices discourage?

    <p>Vague business plans</p> Signup and view all the answers

    What is suggested about start-up capital requirements?

    <p>Startups can be initiated with minimal funds.</p> Signup and view all the answers

    What type of capital is used to purchase fixed assets?

    <p>Fixed Capital</p> Signup and view all the answers

    Which capital is primarily required for daily operations of a business?

    <p>Working Capital</p> Signup and view all the answers

    When is Growth Capital needed?

    <p>When a business plans to expand or change directions</p> Signup and view all the answers

    Which of the following would be considered a startup expense?

    <p>Legal fees for establishing business structure</p> Signup and view all the answers

    What kind of expenses are incurred before a business begins operations?

    <p>Startup Expenses</p> Signup and view all the answers

    Which of the following expenses cannot be depreciated over time?

    <p>Startup expenses</p> Signup and view all the answers

    If you paid for a logo before your business officially opens, how is this classified?

    <p>Startup Expense</p> Signup and view all the answers

    What type of payment for pre-opening employees is categorized as a startup expense?

    <p>Employee pay for work done before opening</p> Signup and view all the answers

    Which type of capital refers to a person's talents and capabilities that contribute to production?

    <p>Human Capital</p> Signup and view all the answers

    What is a characteristic of natural capital?

    <p>Represents ecosystems yielding goods and services</p> Signup and view all the answers

    Which of the following is NOT one of the five forms of entrepreneurial capital?

    <p>Equity Capital</p> Signup and view all the answers

    What do we call the connections within and between social networks?

    <p>Social Capital</p> Signup and view all the answers

    Which of the following best defines debt financing?

    <p>Borrowing funds that need to be repaid with interest</p> Signup and view all the answers

    What is an advantage of equity financing?

    <p>No repayment obligation</p> Signup and view all the answers

    Which type of capital includes physical assets like tools and factories?

    <p>Manufactured Capital</p> Signup and view all the answers

    Which is a primary source of financing for entrepreneurial ventures in the Philippines?

    <p>Personal savings</p> Signup and view all the answers

    Which of the following is an advantage of bootstrapping for entrepreneurs?

    <p>Full control over the company</p> Signup and view all the answers

    What is one common strategy bootstrapping entrepreneurs use to manage cash flow?

    <p>Asking suppliers for longer payment terms</p> Signup and view all the answers

    Which of the following is a disadvantage of bootstrapping?

    <p>You may not earn money for a while</p> Signup and view all the answers

    Which statement best describes the approach of bootstrapping in terms of product development?

    <p>Development is more efficient and customer-focused</p> Signup and view all the answers

    How does bootstrapping affect the growth of a company compared to conventional funding?

    <p>It can take much longer to grow without outside investment</p> Signup and view all the answers

    What is a potential risk of bootstrapping related to finances?

    <p>Accumulating debt due to constrained resources</p> Signup and view all the answers

    What aspect do bootstrapping entrepreneurs focus on more than traditional methods?

    <p>Customer satisfaction</p> Signup and view all the answers

    What is the 'kitchen table pitch' commonly associated with in startup culture?

    <p>Informal pitches made to family and friends</p> Signup and view all the answers

    What is one reason that debt may be considered better than equity for relatives?

    <p>It avoids giving up ownership</p> Signup and view all the answers

    Which group is NOT considered part of the 4Fs of informal investing?

    <p>Finance professionals</p> Signup and view all the answers

    What is a typical expectation when normalizing expected returns among investors?

    <p>Entrepreneurs typically expect higher returns than non-entrepreneurs</p> Signup and view all the answers

    What type of support is NOT usually provided by venture capitalists?

    <p>Personal financial planning</p> Signup and view all the answers

    What defines angel investors in the context of business investment?

    <p>They are high-net-worth individuals providing capital for startups.</p> Signup and view all the answers

    Which of the following factors influence return expectations from informal investors?

    <p>The investor's relationship with the entrepreneur</p> Signup and view all the answers

    Which statement best describes the profile of an angel investor?

    <p>They are often experienced business professionals who provide resources and guidance.</p> Signup and view all the answers

    What is the primary advantage that angel investors offer to startups beyond financial backing?

    <p>Guidance and industry expertise</p> Signup and view all the answers

    Study Notes

    Entrepreneurial Capital

    • There are five types of entrepreneurial capital: Financial, Manufactured, Human, Social, and Natural
    • Human Capital encompasses talents and capabilities that individuals contribute to the production process
    • Financial Capital includes cash and money, while Manufactured Capital comprises manufacturing plants and other physical assets
    • Social Capital refers to connections within and between social networks, as well as connections among individuals
    • Manufactured Capital includes physical means of production, such as tools, clothing, shelter, and factories
    • Natural Capital represents natural ecosystems that provide resources for the future, acknowledging the Earth's valuable resources and their connection to the business environment

    Funding for Entrepreneurial Ventures

    • Businesses need funding for startup costs, ongoing operations, and expansion
    • Startups often face difficulty securing funding due to limited customer base, competition, and risk of failure
    • Bootstrapping involves using personal resources to fund a business, minimizing dependence on external investors
    • Informal investors often come from the "4Fs": Friends, family, founders, and foolhardy investors
    • Venture Capitalists provide capital to young businesses in exchange for equity ownership
    • Angel Investors are high-net-worth individuals who provide capital to startups in exchange for equity ownership or convertible debt
    • Angel Investors offer not only financial resources, but also valuable guidance, industry expertise, and networking opportunities

    Bootstrapping Advantages and Disadvantages:

    • Advantages: No time wasted on investment hunting, full control over the company, not answerable to investors, quick management of money, creative problem-solving, focus on customers, efficient product development and marketing
    • Disadvantages: May not be practical for manufacturing or importing, can take longer to grow the company, potential for limited earnings in the initial stages, increased risk of debt
    • Bootstrapping can lead to a strong, lean, efficient, customer-focused company

    Financial Funds - Estimating Startup Expenses

    • Startup expenses are one-time costs incurred before beginning operations. These include expenses like legal fees, logo design, initial website design, insurance, and payroll.
    • Bootstrapping entrepreneurs can implement strategies like negotiating longer payment terms with suppliers, asking customers to pay in advance, or selling accounts receivable to an agent for a fee.

    Financing from Family

    • Family financing can be a viable source of capital for entrepreneurs
    • Consider factors like motivation, debt vs. equity, formalization of agreements, and avoiding voting stock when dealing with family financing.

    Informal Investing

    • Informal investors often come from the 4Fs: friends, family, founders, and "foolhardy investors."
    • Expected returns from informal investors vary based on factors such as altruism, relationships (e.g., strangers vs. family), gender, age, and entrepreneurial experience.

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    ENT 51112 Programs & Policies on Enterprise Development PDF

    Description

    Test your knowledge on the various types of entrepreneurial capital including financial, manufactured, human, social, and natural capital. Additionally, explore the funding aspects required for startups and ongoing business operations. This quiz covers essential concepts for aspiring entrepreneurs and business students.

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