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Exam 12: A Firms Sources of Financing

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Question 31

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Ralph owns a lumber yard and has a $500,000 purchase order from a construction company.His cost of goods sold for this order is $300,000 Because his company needs working capital,the most logical loan for the lumberyard would be to use ________.

A) an equipment-based loan.
B) factoring.
C) purchase order financing.
D) asset-based financing.

E) C) and D)
F) A) and C)

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Question 32

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Match the term with its definition. a.Balloon payment b.Business angels c.Chattel mortgage d.Crowdfunding e.Factoring f.Initial public offering g.Loan covenants h.Private placement i.Real estate mortgage j.Venture capitalist -The sale of a firm's capital stock to select individuals

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Question 33

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The five C's of credit are character,capacity,capital,conditions,and collateral.

Private placement is the selling of stock to select venture capitalists.

If Joan is applying for a loan for a shelving system to improve her retail sales where the system will serve as collateral,what type of loan would be the most appropriate?

Match the term with its definition. a.Balloon payment b.Business angels c.Chattel mortgage d.Crowdfunding e.Factoring f.Initial public offering g.Loan covenants h.Private placement i.Real estate mortgage j.Venture capitalist -A loan for which items of inventory or other movable property serve as collateral

Match the term with its definition. a.Asset-based loan b.Basis point c.Chattel mortgage d.Equipment loan e.LIBOR (London InterBank Offered Rate) f.Line of credit g.Prime rate h.Purchase-order financing i.Term loan -The interst rate charged by London banks on loans to other London banks

Before accepting money from a business angel,the entrepreneur should:

Luke has a new company and is considering equity financing.Currently,Luke is the only owner and source of equity for the business and makes all executive decisions for daily operations.What effect could the addition of other investors have?

Discuss business traits that business angels look for in prospective investments.What are typical motivations?

Small firms frequently run into problems when:

Will has decided to invest $10,000 into his neighbor's new company.The money will be used in the early stages of development.Will is considered a

Commercial investors are sometimes called business angels.

Harlan's customers have been a little slow in paying their invoices,and he is short on cash to pay his quarterly taxes.Harlan should consider:

Nancy has decided to raise working capital for her upscale boutique business which currently has four locations and is considering franchising the concept in the next few years.Because of the current company organization and anticipated future plans,the most likely form of financing would be ________.

If a Eugenie finances her firm with equity rather than debt,her net income could potentially be greater because

Joann is buying an existing convenience store.When she considers which bank to use,her best choice would be:

Althouth not the primary source of financing for most small business startups,another source of early financing is:

Match the term with its definition. a.Asset-based loan b.Basis point c.Chattel mortgage d.Equipment loan e.LIBOR (London InterBank Offered Rate) f.Line of credit g.Prime rate h.Purchase-order financing i.Term loan -Obtaining cash from a lender who,for a fee,advances the amount of the borrower's cost of goods sold for a specific customer order

Both wholesalers and equipment manufacturers/suppliers can be used as sources of funds.