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Exam 12: A Firm S Sources of Financing

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Question 51

True/False

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A small business that needs to purchase real estate could apply for a 7(a) guaranty loan.

A) True
B) False

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Question 52

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David is trying to decide whether to add capital through investing more of his own money or through borrowing money from the bank.  To help him decide, you remind him that ss long as his firm's rate of return on its assets is greater than the cost of the debt, his rate of return on equity will _____ as the firm uses more debt.

A) decrease
B) increase
C) remain the same
D) fluctuate

E) A) and B)
F) A) and C)

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Question 53

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Small business owners sometimes accept higher levels of debt because doing so permits them to retain all of the stock and full ownership.

Will has decided to invest $10,000 into his neighbor's new company.  The money will be used in the early stages of development. Will is considered a

List the "5 C's of Credit" and explain their impact on borrowing ability.

Nancy has decided to raise working capital for her upscale boutique business which currently has four locations and is considering franchising the concept in the next few years.  Because of the current company organization and anticipated future plans, the most likely form of financing would be ________.

What are the four basic factors that determine how a firm is financed?

Luke has a new company and is considering equity financing.  Currently, Luke is the only owner and source of equity for the business and makes all executive decisions for daily operations. What effect could the addition of other investors have?

When Ben left the corporate rat race to start his own pottery business, he used some of his retirement savings to finance the business.  This practice is known as:

Which type of equity-based crowdfunding will, with SEC approval, allow unaccredited investors to invest?

One factor that influences the choice between debt and equity is the

A source of early-stage capital financing for a company is financing from commercial banks.

The amount of trade credit available to a new company is dependent on the supplier's confidence in the firm and not the type of business.

Williams Alternative Power, Inc. a company developing solar panels, is applying for a loan.  The research the company has done for the manufacturing process would be a(n) _____ asset for the loan evaluation.

Marla runs a not-for-profit daycare center in her home located in a rural area. She is in need of $10,000 to purchase inventory, supplies and equipment. What Small Business Administration program would be the best fit for Marla's situation and why?

Floyd's income statement showed for the current year his company had an operating income of $45,000 and his balance sheet showed total assets of $300,000.  His return on assets is _________ percent.

A firm with potential for large profits, as opposed to high growth potential, has many more possible sources of financing than does a firm that offers only unattractive returns.

Ben left the corporate rat race to start his own business that will allow him to earn a small income while providing plenty of time to pursue his love of pottery making.  He does not expect either growth or high profits.  Ben's prospects for attracting outside financing are:

Discuss two methods of selling stock.

If he holds true to the average, Donald Trump likely invests approximately _____ of his investment in later-stage businesses.