6. After the Angel investing round has run its course, start-ups will often seek financing from a Venture Capital Firm. Note a potential drawback from bringing on a VC firm.

A. VC firms will typically require a board seat thereby resulting in a loss of control

B. VC firms do not anticipate owning the firm for the long haul which might result in job losses for the current executive team, and employees, when the firm is sold outright.

C. VC firms are typically not silent or absent partners often resulting in a significant amount of financial reporting that was never needed, or done, before.

D. All the above

E. None of the above

7. The term used for the process involved when a private company decides to make shares of their stock available to the public is:

A. Over-the-Counter Trading

B. Initial Public Offering

C. Initial Private Offering

D. Stock split

E. A greenshoe option

8. Over the last twenty-five years what period experienced a huge spike in the number of IPOs?

A. 2004-2006 because of the sub-prime mortgage crisis

B. In 2008 due to the presidential administration change (Republican to Democrat) in the White House

C. 1999-2000 because of the frenzy associated with the dot com bubble

D. Early 1990s due to the first Gulf War

9. The sub-prime mortgage crisis was the result of:

A. Relaxed standards of lending designed to facilitate the purchase of homes by lower income citizens.

B. More exotic investment vehicles that encouraged mortgage brokers to process more mortgages.

C. A conflict of interest within bond rating agencies that prompted the provision of favorable ratings on sub-standard investment vehicles.

D. All the above

E. None of the above

10. The Debt/Equity ratio is often used by commercial banks as one of the key statistics in determining credit worthiness. What numbers are included in its calculation?

A. Current market value of stock and the prime rate

B. Market capitalization and P/E Ratio.

C. Accounts payable older than 90 days and cash on hand

D. Long -Term Debt and Stockholders Equity.

11. As we have discussed multiple times, there are just three ways a company can raise capital. The results of those attempts are reflected on the balance sheet. Two of the three are embodied in one balance sheet caption. What caption is that?

A. Current Assets

B. Corporate Assets plus Current Liabilities

C. Stockholders Equity

D. Retained Earnings

E. Treasury Stock

12. Assume the following about a company; 1. The interest rate at which they have borrowed in the past is 5%. 2. The interest rate on outstanding debt is 6.5%, 3. Long-Term Debt totals $500,000 4. The original IPO (There have been no subsequent stock issues) yielded $2,000,000 5. Since its organization the company has produced profits of $750,000 and 6. This past year, for the first time in existence, they paid dividends of $200,000. Based on the above, what is their Debt/Equity ratio?

A. .80

B. .72

C. 4:1

D. .16

E. .20

13. Some companies choose to issue preferred stock in addition to common stock. Most issues of preferred stock are known as cumulative preferred stock. This means that:

A. The firm must pay all past preferred dividends before common shareholders are paid.

B. The firm can pay preferred dividends only when all corporate taxes have been paid.

C. Dividends can be deferred by the shareholder and carried over into a subsequent year to reduce their tax liability

D. Interest expense will be accumulated on unpaid dividends.

14. Assume you are the CFO of a large publicly traded company that must handle a large quantity of highly poisonous and volatile materials. Further assume that the company needs to borrow money because its major supplier, one of a very few who can supply these materials, demands payment within 28 days. How might the company go about financing the time period between vendor payment and anticipated customer payment?

A. They would borrow short term, such as a line of credit,

B. They would trade stock with the bank to avoid depleting their cash reserves

C. They would borrow long term to match the nature of the assets being purchased so as not negatively impact their current ratio.

D. They would have difficulty obtaining funds because of the high price of government compliance.

15. Ownership of stock, or equity, in a company is a residual claim. This means that:

A. All employees who own stock must reside in the same geographical region as the corporate office.

B. The shareholder participates in the ups and downs of the company after debt claims are satisfied.

C. Stock cannot be sold unless approved by the Board of Directors

D. Additional stock cannot be purchased unless all debtholders have been paid.

16. Standard & Poors is in the business of rating corporate bonds. These ratings are very important to corporations because they control what the interest rate will be on the related bond. Which bond rating below would prompt the highest interest rate on borrowings for the company?

A. BBB

B. BAA

C. AAA

D. CBB

17. When Enron declared bankruptcy in 2002, it represented the largest corporate bankruptcy in US corporate history. Unfortunately, the sub-prime mortgage crisis caused several larger bankruptcies to occur including Lehman Bros which is still the largest bankruptcy in corporate history. What large insurance company was considered too big to fail and was bailed out by the US Government?

A. Visa

B. General Motors

C. Goldman Sachs

D. AIG

E. Merrill Lynch

18. If a company is considering an Initial Public Offering, they must choose an underwriter. Which of the following does the underwriter NOT do?

A. They provide the company with procedural and financial advice

B. They buy the stock issue

C. They sell the issue to the public

D. Purchase shares in the secondary market

E. The may provide a FIRM commitment to purchase all the stock from the founder.