Question
Your new venture just received a term sheet from a venture capital firm you presented your business plan to. In it you notice that the
Your new venture just received a term sheet from a venture capital firm you presented your business plan to. In it you notice that the VC firm has a 1x liquidation preference. What does this imply if you take the VC financing now and the venture is eventually sold without an increase in value from the time of this financing?
Group of answer choices
The VC can insist that your company maintains twice the normal quick ratio
It is not important
If the firm fails, the entrepreneurs will need to pay the difference from their own personal assets
The company's current assets must be greater than its fixed assets
The VC will receive its full investment in your company before founders receive anything
When a firm is in financial distress and faces balance sheet insolvency what is the underlying problem?
Group of answer choices
The firm's net income is growing too fast
The firms equity exceeds its debt
The firm's total debt exceeds its total assets
The firm's cash balance is increasing
All of these are problems
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