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Questions and Answers

What is an entrepreneur?

A person who starts a new business and assumes all the risks and rewards of running it.

A(n) _________ is a person who starts a new business and assumes all the risks and rewards of running the business.

entrepreneur

Which of the following statements about entrepreneurs is FALSE?

  • Entrepreneurs are often innovative.
  • Entrepreneurs aren't exposed to any risk when starting a new business. (correct)
  • Entrepreneurs can create jobs.
  • Entrepreneurs require business plans.

    • Which of the following statements about entrepreneurs is TRUE?

    <p>Neither A nor B</p> Signup and view all the answers

    Which of the following statements about entrepreneurs is FALSE?

    <p>Entrepreneurs are not willing to take risks.</p> Signup and view all the answers

    What are some common traits good entrepreneurs have?

    <p>They take calculated risks and try to solve problems through new products and processes.</p> Signup and view all the answers

    If an entrepreneur says they are using 'bootstrap financing,' what are they referring to?

    <p>They used their own money to start their business.</p> Signup and view all the answers

    What method of financing do entrepreneurs often use when they are first developing their business idea?

    <p>Bootstrapping</p> Signup and view all the answers

    Imagine you are an entrepreneur starting a new video game company. What kind of financing would you most likely use to test out your new business idea?

    <p>Bootstrapping</p> Signup and view all the answers

    What is the difference between debt financing and equity financing?

    <p>Equity financing involves selling shares of ownership in the company while debt financing does not.</p> Signup and view all the answers

    Which of the following statements about debt financing is FALSE?

    <p>When a bank gives a company a loan, they become partial owners of the company.</p> Signup and view all the answers

    Which of the following statements about equity financing is FALSE?

    <p>Companies often have to pay interest when they use equity financing.</p> Signup and view all the answers

    Imagine you've used your own money to develop your business idea. Now you need more funding to keep growing. Which financing method would be available to you at this stage?

    <p>Angel investing</p> Signup and view all the answers

    Imagine you own a successful startup company that's been doing well for several years. You think you can grow your company if you had more industry connections. What method of financing would be best for your company at this stage?

    <p>Venture capital</p> Signup and view all the answers

    Imagine you own an established startup with growing profits. You are looking for funding to greatly expand company operations. What method of financing would be best for you?

    <p>Going public</p> Signup and view all the answers

    In finance, the acronym IPO stands for:

    <p>Initial Public Offering</p> Signup and view all the answers

    An _______ is when a private company offers stock to the public for the first time.

    <p>Initial Public Offering</p> Signup and view all the answers

    When a private company wants to offer stock on the stock market, they go through the _______ process.

    <p>Initial Public Offering</p> Signup and view all the answers

    When a company 'goes public,' only a small amount of investors are allowed to invest in the company.

    <p>False</p> Signup and view all the answers

    When a company 'goes public,' investors anywhere can buy shares of ownership in the company.

    <p>True</p> Signup and view all the answers

    When a startup wants to offer stock on the stock market, they go from a private to a public company.

    <p>True</p> Signup and view all the answers

    Which of the following is a disadvantage of going public?

    <p>Losing some control over company decisions.</p> Signup and view all the answers

    Which of the following are disadvantages of going public?

    <p>Both A and B</p> Signup and view all the answers

    Which of the following is an advantage of going public?

    <p>Ability to attract many investors.</p> Signup and view all the answers

    Which of the following steps is NOT involved in going public?

    <p>Finding private investors to invest.</p> Signup and view all the answers

    When a company is attempting to go public, they will hire an investment bank to...

    <p>Both A and C (figure how much $ to raise AND create a prospectus)</p> Signup and view all the answers

    Which of the following statements about the IPO process is FALSE?

    <p>Companies must seek out private investors for the company.</p> Signup and view all the answers

    Companies already on the stock market get to choose the price of their stocks.

    <p>False</p> Signup and view all the answers

    When companies go public they get a direct say in choosing the price of their stocks.

    <p>True</p> Signup and view all the answers

    The price of company stocks already trading on the stock market are determined by supply and demand.

    <p>True</p> Signup and view all the answers

    Study Notes

    Entrepreneur Definition and Characteristics

    • An entrepreneur starts a business and assumes all associated risks and rewards.
    • Common traits of successful entrepreneurs include taking calculated risks and solving problems through innovative products and processes.

    Financing Methods

    • Bootstrap financing refers to using personal funds to launch a business.
    • Bootstrapping is often utilized in the initial stages of developing a business idea.

    Types of Financing

    • Debt Financing: Involves loans from banks; does not grant the creditor ownership in the company.
    • Equity Financing: Involves selling shares of ownership; no interest payments required.
    • Angel Investing: Available after initial self-funding; provides additional capital from wealthy individuals.
    • Venture Capital: Ideal for established startups looking to expand through industry connections.
    • Going Public: Selling shares to the public, typically used for major expansion plans.

    Initial Public Offering (IPO)

    • An IPO marks a private company's first sale of stock to the public.
    • The IPO process requires hiring investment banks to determine fundraising goals and create a prospectus.
    • After going public, shares are open for purchase to all investors, not just a select few.

    Advantages and Disadvantages of Going Public

    • Advantages include attracting numerous investors and increasing capital for growth.
    • Disadvantages involve losing some control over company decisions and meeting expensive legal requirements.
    • The stock price during an IPO is influenced by supply and demand rather than set by the company itself.

    Statements about Entrepreneurs and Financing

    • Entrepreneurs do face risks when starting businesses; any claim to the contrary is false.
    • Companies already trading don’t directly set their stock prices; these are determined by market dynamics.
    • Companies transitioning from private to public status enable broader investment opportunities through public stock sales.

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    Test your knowledge about entrepreneurship with these flashcards. Each card presents key definitions and concepts related to starting a new business, including the roles and risks faced by entrepreneurs. Perfect for anyone studying business fundamentals!

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