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</p> Signup and view all the answers

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

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

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

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

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

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

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

    <p>7.37%</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</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</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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