Question 1

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:

Accepted Answer

A)   sending the late payers to a collection agency.
B)   factoring.
C)   putting his late payers on credit hold until they pay up.
D)   taking out a personal loan to pay the taxes.E) A) and C)
F) B) and C)

Question 2

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

Accepted Answer

A)   family members.
B)   commercial banks.
C)   business suppliers.
D)   asset-based lenders.E) A) and B)
F) None of the above

Question 3

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?

Accepted Answer

A)   chattel mortgage
B)   line of credit
C)   real estate mortgage
D)   term loanE) None of the above
F) All of the above

Question 4

Qualified small businesses that cannot obtain business loans through normal lending channels can get loans directly from the SBA through its 7(a) Loan Guaranty Program.

Accepted Answer

A) True 
 B)False

Question 5

Fans set up a crowdfunding account to produce new, not-for-profit episodes of Star Trek.  This type of crowdfunding uses the ___________ approach.

Accepted Answer

A)   donations
B)   rewards
C)   pre-purchases
D)   equity investingE) A) and B)
F) None of the above

Question 6

Granville owns a construction company and would like to purchase a mobile construction office. The bank would likely offer him a _____ mortgage.

Accepted Answer

A)   chattel
B)   real estate
C)   revolving
D)   termE) C) and D)
F) B) and C)

Question 7

Generally, as long as a firm's operating income return on its assets in greater than the cost of debt, the owners' return on equity investment will decrease as the firm uses more debt.

Accepted Answer

A) True 
 B)False

Question 8

Connie owns a small but growing company that produces gorilla glass for smartphones.  One possible source of funding might be:

Accepted Answer

A)   Dell Computers, a well-known PC manufacturer.
B)   Intel, who produces computer chips.
C)   Microsoft, a company that markets software applications.
D)   Samsung, who sells smartphones.E) B) and C)
F) A) and D)

Question 9

Isaac is looking for a business angel.  His best chance of finding one is through:

Accepted Answer

A)   contact with business associates, accountants and lawyers.
B)   his banker.
C)   advertisements in magazines.
D)   contact with friends and relatives.E) All of the above
F) B) and C)

Question 10

Sondra is a business angel who is looking for a start-up company in which to invest. Which company would she most likely invest in based on current research?

Accepted Answer

A)   A company that currently has fewer than 20 employees and has plans to grow
B)   A business out of her home state to diversify her risk
C)   A business in an industry in which she has no experience
D)   A company formed by a group of experts in the industryE) A) and B)
F) C) and D)

Question 11

If a company has a signed purchase order from a creditworthy customer and the gross profit margin on the order is anticipated to be 36 percent, purchase-order financing is likely.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)   first make application for a bank loan.
B)   use all available personal assets to finance the new venture.
C)   request a loan from the angel instead of investment to prevent having to give up control.
D)   make sure the business angel is accredited.E) A) and D)
F) A) and B)

Question 13

Venture capitalists restrict their investment in startup companies.

Accepted Answer

A) True 
 B)False

Question 14

Describe four different loan covenants that a bank may impose on a loan

Accepted Answer

1. A bank will usually require that the ...

Question 15

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

Accepted Answer

A)   a national bank that processes credit card payments.
B)   the credit union where she is already a member.
C)   a bank close to her store.
D)   the largest one in her town, which is located on the other side of town from her store.E) None of the above
F) All of the above

Question 16

In addition to the interest rate on his business loan, Paul should also give attention to:

Accepted Answer

A)   the maturity date.
B)   the reserve requirement.
C)   the tax liability of the loan.
D)   the LIBOR on the day the loan is approved.E) A) and C)
F) B) and D)

Question 17

A chattel mortgage is a loan for which real property, such as land or a building, serves as collateral.

Accepted Answer

A) True 
 B)False

Question 18

Penelope is planning to launch her first business.  She will most likely acquire her initial financing from:

Accepted Answer

A)   venture capitalists.
B)   personal savings.
C)   wealthy individuals.
D)   the securities market.E) A) and B)
F) All of the above

Question 19

Galen runs an Greek restaurant and is currently considering leasing or purchasing some updated equipment.  What statement is correct?

Accepted Answer

A)   Because the equipment he is buying will become outdated in two years, leasing would be a better option than purchasing.
B)   Because the restaurant is new and he wants to protect his cash flow, purchasing would be better since purchasing costs less than leasing.
C)   If the equipment is leased, the restaurant's lines of credit will be increased.
D)   Leasing is always more expensive than purchasing over the term of the leaseE) B) and C)
F) A) and D)

Question 20

The age of a company has little impact on the types of financing available to it.

Accepted Answer

A) True 
 B)False

Exam 12: A Firm S Sources of Financing

Isaac is looking for a business angel. His best chance of finding one is through:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Penelope is planning to launch her first business. She will most likely acquire her initial financing from:

Correct AnswerverifiedShow Answer

In addition to the interest rate on his business loan, Paul should also give attention to:

Correct AnswerverifiedShow Answer

Venture capitalists restrict their investment in startup companies.

Correct AnswerverifiedShow Answer

Generally, as long as a firm's operating income return on its assets in greater than the cost of debt, the owners' return on equity investment will decrease as the firm uses more debt.

Correct AnswerverifiedShow Answer

Fans set up a crowdfunding account to produce new, not-for-profit episodes of Star Trek. This type of crowdfunding uses the ___________ approach.

Correct AnswerverifiedShow Answer

Describe four different loan covenants that a bank may impose on a loan

Correct Answerverified1. A bank will usually require that the ...View AnswerShow Answer

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?

Correct AnswerverifiedShow Answer

Connie owns a small but growing company that produces gorilla glass for smartphones. One possible source of funding might be:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The age of a company has little impact on the types of financing available to it.

Correct AnswerverifiedShow Answer

If a company has a signed purchase order from a creditworthy customer and the gross profit margin on the order is anticipated to be 36 percent, purchase-order financing is likely.

Correct AnswerverifiedShow Answer

A chattel mortgage is a loan for which real property, such as land or a building, serves as collateral.

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Sondra is a business angel who is looking for a start-up company in which to invest. Which company would she most likely invest in based on current research?

Correct AnswerverifiedShow Answer

Galen runs an Greek restaurant and is currently considering leasing or purchasing some updated equipment. What statement is correct?

Correct AnswerverifiedShow Answer

Qualified small businesses that cannot obtain business loans through normal lending channels can get loans directly from the SBA through its 7(a) Loan Guaranty Program.

Correct AnswerverifiedShow Answer

Granville owns a construction company and would like to purchase a mobile construction office. The bank would likely offer him a _____ mortgage.

Correct AnswerverifiedShow Answer

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1. A bank will usually require that the ...
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