Exam (elaborations)
Entrepreneurial Finance 7th Edition Test Bank
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Entrepreneurial Finance 7th Edition Test Bank
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,Name: Class: Date:Chap 01_7e_Leach
Indicate whether the statement is true or false.
1. In the early 1970s, Harry Dent recognized that the U.S. economy centered on the creation and distribution of
information.
a. True
b. False
2. Nearly half of business failures are due to economic factors such as inadequate sales, insufficient profits, and
industry weakness.
a. True
b. False
3. Private financial markets are a place where standardized contracts or securities are traded on organized
securities exchanges with restrictions on how they can be transferred.
a. True
b. False
4. One principle of entrepreneurial finance is “risk and expected reward go hand in hand."
a. True
b. False
5. Entrepreneurs provide the financing to individuals who think, reason, and act to convert ideas into commercial
opportunities and create opportunities.
a. True
b. False
6. Financial distress occurs when cash flow is insufficient to meet current debt obligations.
a. True
b. False
7. The me-first economy reflects the willingness of individuals to share their assets with others to provide a new
way of distributing goods and services.
a. True
b. False
8. The sharing economy refers to the cross-referencing of innovations for record-keeping purposes.
a. True
b. False
9. Mezzanine financing is temporary financing needed to keep the venture afloat until the next offering.
a. True
b. False
10. Mark Twain once said, “I was always able to see an opportunity before it became one.”
a. True
b. False
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,Name: Class: Date:
Chap 01_7e_Leach
11. Entrepreneurial finance is the application and adaptation of financial tools and techniques to the planning,
funding, operations, and valuation of an entrepreneurial venture.
a. True
b. False
12. Although the risks associated with starting a new entrepreneurial venture are large, there is always room for
one more success.
a. True
b. False
13. The millennials generation consists of people born in the United States after 1996.
a. True
b. False
14. While cash is the language of business, accounting is the currency.
a. True
b. False
15. Financial causes, such as excessive debt and insufficient financial capital, are not major contributors to business
failures.
a. True
b. False
16. The housing asset bubble burst in 2006.
a. True
b. False
17. Nine principles of entrepreneurial finance are identified and explored in this textbook.
a. True
b. False
18. In Chapter 1, five megatrend categories are identified as sources of entrepreneurial opportunities.
a. True
b. False
19. Technological change may be the most important source of entrepreneurial opportunities.
a. True
b. False
20. Free cash is all of the cash available to cover operating expenses.
a. True
b. False
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, Name: Class: Date:
Chap 01_7e_Leach
21. Disruptive innovation is an innovation that creates a new market or network that disrupts and displaces an
existing market or network.
a. True
b. False
22. The second stage in a successful venture's life cycle is the startup stage.
a. True
b. False
23. The owner–debtholder conflict is the divergence of the owners' and lenders' self-interests as the firm gets close
to going “public.”
a. True
b. False
24. Venture character and reputation can be assets or liabilities.
a. True
b. False
25. The entrepreneurial process involves: developing opportunities, gathering resources, and managing and building
operations, all with the goal of creating value.
a. True
b. False
26. An initial public offering provides a venture with a source of bridge financing.
a. True
b. False
27. Free cash flows are adjusted for risk and the time value of money when used to calculate the value of a
venture.
a. True
b. False
28. Perhaps the most important invention in shuttling us from an industrial society to an information society was the
computer chip.
a. True
b. False
29. Reasonable estimates place nonemployer (e.g., single person or small family) businesses started each year at
less than 100,000.
a. True
b. False
30. Business angels are wealthy individuals, operating as informal or private investors, who provide venture
financing for small businesses.
a. True
b. False
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