FIN 622 VU Lesson 19: Corporate Finance
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Questions and Answers

What is venture capital?

  • Government grants for financing of new, growing or struggling businesses
  • Capital provided by banks for financing of new, growing or struggling businesses
  • Personal savings used for financing of new, growing or struggling businesses
  • Capital provided by outside investors for financing of new, growing or struggling businesses (correct)

What type of investments are venture capital investments?

  • Guaranteed investments with fixed returns
  • High risk investments with potential for above average returns (correct)
  • Moderate risk investments with average returns
  • Low risk investments with below average returns

What is a venture capitalist (VC)?

  • An individual who provides loans to small businesses
  • A person who invests in start-up businesses (correct)
  • An employee of the government who makes investments in businesses
  • A financial institution that invests in large corporations

What is a venture capital fund?

<p>A pooled investment vehicle primarily investing in risky enterprises (B)</p> Signup and view all the answers

What are alternatives to venture capital for entrepreneurs seeking initial funding?

<p>Angel investors or personal savings (D)</p> Signup and view all the answers

What is the primary reason why entrepreneurs seek initial funding from angel investors?

<p>Venture capitalists have strict requirements for potential investments (B)</p> Signup and view all the answers

What is the practice called when start-ups seek to self-finance until they can approach outside capital providers?

<p>Bootstraping (B)</p> Signup and view all the answers

In which industries can businesses more cheaply raise debt to finance their growth?

<p>Manufacturing and mining (C)</p> Signup and view all the answers

What factor is NOT considered before making a decision to raise capital through venture?

<p>No physical collateral is required (C)</p> Signup and view all the answers

Why are market values preferred for computing the weighted average cost of bond interest?

<p>They reflect the current risk level in prices (B)</p> Signup and view all the answers

What is the total book value of bond debt in million?

<p>$1,493 (B)</p> Signup and view all the answers

What is the weighted average cost of bond debt using market values?

<p>7.37% (C)</p> Signup and view all the answers

What does the practice of 'bootstrapping' help start-ups avoid?

<p>Dilutive effects of receiving funding before claims are proven (A)</p> Signup and view all the answers

Why do many start-ups seek to self-finance before approaching outside capital providers?

<p>To avoid the dilutive effects of receiving funding before claims are proven (B)</p> Signup and view all the answers

What type of investments are venture capital investments?

<p>High risk investments</p> Signup and view all the answers

What is the primary role of a venture capitalist (VC)?

<p>To make investments in new, growing, or struggling businesses</p> Signup and view all the answers

What is the primary purpose of a venture capital fund?

<p>To primarily invest in enterprises too risky for standard capital markets or bank loans</p> Signup and view all the answers

What is the nature of the potential returns from venture capital investments?

<p>Above average returns</p> Signup and view all the answers

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