- 21. Reasonable estimates place nonemployer (e.g., single person or small family) business started each year at less than 100,000.
- 22. Bill Gates once said: “I was seldom able to see an opportunity, until it ceased to be one.”
- 23. A study by Phillips and Kirchhoff using Dun & Bradstreet data found that about three-fourths of new firms were still in existence after two years of operation.
T. 24. Studies by Phillips and Kirchhoff, and by Headd, found that one-half of new firms or new employers were still in existence after four years of operation.
F. 25. Nine principles of entrepreneurial finance are identified and explored in this entrepreneurial finance textbook,
T. 26. The “time value of money” is an important component of the rent one pays for using someone else’s financial capital.
F. 27. A venture’s financial objective is to survive.
F. 28. Private financial markets are a place where standardized contracts or securities are traded on organized security exchanges with restrictions on how they can be transferred.
F. 29. Free cash flow is the net income forecast to be available to the venture’s owners over time.
T. 30. Free cash flows are adjusted for risk and the time value of money when used to calculate the value of a venture.
T. 31. Free cash exists when cash exceeds that which is needed to operate, pay creditors, and invest in assets.
F. 32. Free cash is all the cash available to cover operating expenses.
T. 33. Owner-manager (agency) conflicts are differences between manager’s self-interest and that of the owners who hired the manager.
F. 34. The owner-debtholder conflict is the divergence of the owners’ and lenders’ self-interest as the firm gets close to going “public.”
F. 35. The financial objective of increasing value is inconsistent with developing positive character and reputation.
T. 36. Entrepreneurial finance is the application and adaptation of financial tools and techniques to the planning, funding, operations, and valuation of an entrepreneurial venture.
F. 37. Financial distress occurs when cash flow is insufficient to meet current debt obligations.
T. 38. The second stage in a successful venture’s life cycle is the startup stage.
F. 39. The rapid growth stage directly follows the startup stage.
- 40. Early-stage ventures include firms in their development, startup, or survival live cycle stages.
T. 41. Business angels are wealthy individuals acting as informal or private investors, who provide venture financing for small businesses.
F. 42. Mezzanine financing is temporary financing needed to keep the venture afloat until the next offering.
T. 43. “Crises and bubbles” and “emerging economies and global change” are considered to be sources of entrepreneurial opportunities.
T. 44. In Chapter I five mega-trend categories are identified as sources of entrepreneurial opportunities.
F. 45. Entrepreneurial opportunities can occur only when there are societal changes in the world.
T. 46. One principal of entrepreneurial finance is “risk and expected reward go hand in hand.