AFM 191 - chp.1.3 - Private vs public companies

Question 1

How do private companies go public?

Answer 1

through an IPO

Question 2

How do most companies start as?

Answer 2

as a privately held company

Question 3

define a privately held company

Answer 3

a small group of private investors provides capital in return for a private stock

Question 4

Provide the different types of private shareholders

Answer 4

1. founders
2. seed/angel investors
3. venture capital firms
4. private equity firms

Question 5

Define founders

Answer 5

individuals that come up with a business idea and start-up a business and mostly own private stock

Question 6

define angel investors

Answer 6

wealthy individuals that provide financing to start-up a business in return for ownership. usually founder’s family or friends that support the founder’s idea.

Question 7

define venture capital firms

Answer 7

firms that provide funding to high-potential privately-held start-ups and small companies in return for ownership

Question 8

define private equity firms

Answer 8

firms that provide funding to high-growth small + medium-sized privately held businesses in return for ownership

Question 9

Define an initial public offering (IPO)

Answer 9

the first time a privately held company issues share in a public stock market

Question 10

define publicly held comapnies

Answer 10

companies that can sell their stock to public investors in exchange for cash. public companies must have outstanding shares listed on a stock exchange to sell stocks.

Question 11

What’s the typicaly equity investmsnet life cycle of a company

Answer 11

as a private company
1. seed investment
2. angel investment
3. venture capital/private equity investment
transition to public company
4. IPO
5. secondary public offerings

Question 12

what can both private and public companies obtain as financing

Answer 12

bank financing

Question 13

What’s the difference between accounting standards between private and public companies

Answer 13

private companies can follow ASPE or IFRS

public companies must follow IFRS

Question 14

what’s the different between audited financial statements between public and private companies

Answer 14

private companies are not required to prepare audited financial statements

public companies are required to prepare audited financial statements.

Question 15

What’s the difference between investors/owners in private and public comapnies

Answer 15

private company investors include founders, angel investors, venture capital, and private equity firms

public company investors include public shareholders.

Question 16

what’s the difference in financing between public vs private companies?

Answer 16

private companies cannot obtain financial from public financial markets

public companies can obtain financing from public financial markets.

Question 17

what’s the difference in availability of info in private vs public companies

Answer 17

financial info of private companies is not publicly available

financial info of public companies is publicly available.

Question 18

what’s the difference between board of directors (BOD) in private and public companies

Answer 18

private companies can choose to have a BOD or not

public companies must have a BOD.

Question 19

what’s the similarity in private + public companies when it comes to bank financing

Answer 19

both types of companies can borrow money rom the bank

Question 20

What’s similar to public + private companies when it comes to bond issuance

Answer 20

both types of companies can issue bonds but it’s more common for public companies to do so.

Question 21

what’s similar in private + public companies in internal reporting

Answer 21

both types of companies prepare internal reports for their internal stakeholders

Question 22

What’s similar in private + public companies in external reporting

Answer 22

both private and public companies prepare external reports for their external stakeholders.

Question 23

what is an alternate name for angel investors?

Answer 23

private or seed investors.