1.Venture capital firms make financial investments in new companies that are

a. large and sluggish in their growth

b. large and expected to grow rapidly

c. still relatively small in size, buthave the potential to grow substantially

d. small and with little prospects for growth

2.When firms need to raise capital for expansion or capital spending, theycan

a. borrow money from a bank

b. sell stock

c. issue bonds

d. all of the above

3.A dividend is

a. the increase in the stock valuebetween when one buys and sells it

b. a direct paymentfrom a firm to its shareholders

c. the same as a bond

d. the same as a capital gain

4.Which of the following is true about apublic company? Select all that apply:

a. It is owned by the people who run it on a day-to-day basis.

b. It is a firm that has sold its stock by making it available to be bought and sold by outside investors.

c. It is owned by shareholders.

d. It is the same as a partnership.

5.A firm is more likely to choose borrowing from a bank or issuing bonds as forms of financing if it is:

a. more established and its strategyappears likely to lead to profits in the near future

b. just starting up and has projections for stable growth

c. already established but has fallen on hard times

d. just starting up and appears very high risk, but could also be very profitable

6.What are the benefits of issuing stock for a small and growing firm?

a. it increases its visibility in the financial markets

b. it allows it accessto large amounts of financial capital for expansion

c. it wouldn't have to worry about repaying the money obtained through selling stock

d. all of the above

7.Which of the following are ways for firms to borrow funds? Select all that apply:

a. get loans from banks

b. sell stocks

c. issue bonds

d. get money from a venture capital investor

8.Which of the following describe situations where afirm may not be able to use its own profits as a source of financial capital? Select all that apply:

a. A large company has been operating for about fifty years and has seen steady growth in profits each year.

b. A new technology company is just starting and still developing its product.

c. A company has been suffering low profits for the past few years and even lost money in the most recent fiscal quarter.

d. A large, established firm saw lower profits this year compared to previous years. However, the companyis still financially sound and is not currently interested in any major expansion.

9.An initial public offering(IPO)is:

a. important because it provides the funds to repay the early-stage investors, like angel investors andventure capital firms

b. important because it provides an established company with financial capital for a substantial expansion of its operation

c. a firm's first stock sale to thepublic

d. all of the above

10.Lisa started her own company which providesbookkeeping services to business clients. She is the only owner and she operates her company on a day-to-day basis all by herself. Her company is most likely:

a. a partnership

b. a public company

c. a sole proprietorship

d. a corporation