Exam (elaborations)

Example Exam Questions

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Course
1ZM70: Entrepreneurial Finance (1ZM70)

Institution
Technische Universiteit Eindhoven (TUE)

Book
Venture Capital and the Finance of Innovation

In the absence of practice questions for the multiple-choice questions for the exam, I myself drew up questions on the basis of the exam material in order to prepare the exam.

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Uploaded on August 14, 2022
Number of pages 19
Written in 2021/2022
Type Exam (elaborations)
Contains Questions & answers

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Book Title:Venture Capital and the Finance of Innovation

Author(s):A Metrick, Ayako Yasuda

Edition:Unknown
ISBN:9780470074282
Edition:Unknown

Institution
Technische Universiteit Eindhoven (TUE)
Education
Innovation Sciences
Course
1ZM70: Entrepreneurial Finance (1ZM70)

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Example Exam Questions (by Xaveria Vossen)

1. Which of the following concept is NOT a VC main characteristic?
A. VC is a financial intermediary that invests with investors’ capital directly in portfolio
(only private) companies
B. VC’s primary goal is to maximize financial return by exiting investments through sale of
initial public offering (IPO)
C. VC invests to fund the internal growth of companies without having an active role inside
the company
D. All the above are VC main characteristics

2. Fill in the gaps: ‘a VC fund is organized as a __________, with the venture capitalist
acting as the __________ of the fund and the investors acting as the __________.
A. Limited Liability Corporation, general partner (GP), limited partners (LP)
B. Limited Liability Corporation, limited partners (LP), general partner (GP)
C. Limited Partnership, general partner (GP), limited partners (LP)
D. Limited Partnership, limited partners (LP), general partner (GP)

3. What is the difference between VCs and Angel Investors?
A. Angel Investors take an active role within the company where VCs stay passive
B. VCs invest with investors’ capital where angel investors invest with private money
C. VCs success or failure in investing in companies is only due their ability to choose
investments where Angel Investors are also personally involved
D. Angel Investors are often unofficial recruiters and matchmakers where VCs won’t have
this expertise

4. What is NOT a difference between venture capital and corporate venture capital?
A. Corporate VC often have strategic objectives compared to VCs financial objectives
B. Corporate VC does not have dedicated supplies of capital where VCs do have them

,C. Corporate VC does not have an expectation that capital will be returned where VCs have
this as their main objective
D. Corporate VC does require an exit strategy where VCs see initial public offering (IPO) as
the only objective

5. Which types of investments are defined in the following statements:
I: Invest began to use the same capital structure subordinated debt with some equity
participation to provide another layer of debt financing for highly leveraged buyout
(LBO) transactions
II: Focused on troubled companies where an investor takes a majority control of
their portfolio companies also called special situations
A. Mezzanine and distress investing
B. Mezzanine and buyout investing
C. Buyout investing and hedge funds
D. Hedge funds and distress investing

6. What is NOT an example of a limited partner (LP)?
A. Angel Investor
B. Business professional
C. Pension fund
D. University endowment

7. What is the definition of a capital call?
A. Thew legal right of an LP to demand a portion of the money promised to it by an
investor
B. How much an investment or trading account is down from the peak before it recovers
back to the peak
C. The initial price of a stock, bond, or other security when it is first offered in the open
market
D. The total amount of capital promised by the LPs over the lifetime of the fund

8. When will a fund officially been closed?
A. When the general partners (VC firms) have raised the full amount of committed capital
and they are ready to start investing again
B. When there is change of focus over time or a mix of strategies of early-state and later-
stage investments at once
C. When the drawdown is bigger than the committed capital
D. When the periodic capital provisions are at least the takedown and there are no longer
capital calls

9. Which of the following statements is true
I: A venture partner means that the new VC is a partner in sense of sharing profits of
company
II: A Fund-of-funds (FOF) is organized as a general partnership to the fund that
invests in other private equity funds, instead of directly investing in companies
A. Statement I is true, and statement II is true
B. Statement I is true, and statement II is false

, C. Statement I is false, and statement II is true
D. Statement I is false, and statement II is false

10. Fill in the gaps: ‘The investment capital of a fund is the _________ of the fund minus
the _________.’
A. Carried interest, management fees
B. Management fees, carried interest
C. Lifetime fees, committed capital
D. Committed capital, lifetime fees

11. What is an unrealized investment?
A. An investment that is not yet realized
B. An investment that is equal to the dollar amount of the original investment
C. Investments that have not yet been exited in a company that still exist
D. An investment that is hard to calculate for non-traded companies

12. Why are VC funds different from other parts of the money management industry
that have management fees that are computed based on the market value of the
portfolio. Why is this the case?
A. Because if management fees were to be based on portfolio values, then these fees
would be low in the first few years and the VCs might be unable to cover their fixed
costs
B. Because management fees based on portfolio value would create an incentive for VCs to
invest quickly, and this would result in an inevitable sacrifice in quality
C. Because ‘market’ values for the portfolio are hard to calculate for non-traded
companies, the level of fees would be somewhat arbitrary
D. All the above

13. Fill in the gaps: ‘any money and/or benefits that have been given out to investors are
called ________ and any payments prior to any profit sharing paid to investors is
called ________. Together with carried interest basis, the timing of the carried
interest these are variation that occur in the percentage level of _______.’
A. Clawbacks, priority returns, carried interest
B. Priority returns, carried interest, clawbacks
C. Carried interest, clawbacks, priority returns
D. Unrealized investments, priority returns, carried interest

14. Fill in the gaps: ‘_______ is another factor affecting the timing of carried interest, the
GP promises some preset rate of return to the LPs before the GPs can collect any
carry. The GP will be provided with a greater share of the profits once the _______
has been paid, this is called _______.’
A. Priority returns, preferred returns, catch-up provision
B. Cath-cup provision, net contributed capital, priority return
C. Net contributed capital, catch-up provision, preferred return
D. Preferred return, priority return, catch-up provision

15. What is not an example of a financial statement?

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