Chapter 7

Question 1

refers to a person who starts a business and is willing to accept the risk associated with investing money in order to make money

Answer 1

entrepreneur

Question 2

common characteristics of an entrepreneur (MERFS)

Answer 2

motivated
expertise
risk management
focus 
self-belief

Question 3

refers to an individual who provides capital to a business venture for start-up or expansion purposes

Answer 3

venture capitalist

Question 4

core fundamentals to assess when investing in a start up business (5)

Answer 4

• Quality of management team
• Uniqueness of product/service offering
• Market size and opportunity alignment
• Current conditions within market
• Investment hypothesis (business plan)

Question 5

refers to that point in time when an organization is able to cover the actual cash expenses of an operation from the revenue it generates, cash inflow > cash outflow

Answer 5

cash flow positive

Question 6

the point where total expenses = total revenue, the income statement would show profit = $0, cash inflow = cash outflow

Answer 6

breakeven point

Question 7

are decision points where the current path a business is taking is assessed relative to where the company is and where it should be

Answer 7

inflection point

Question 8

business plan rules of the road

Answer 8

1. know your customer
2. Know why you will win
3. Know how you will win
4. Know what it takes to win
5. Demonstrate why others should believe in you

Question 9

a business model under which business owners share a common brand and operate through a defined business framework

Answer 9

franchise

Question 10

benefits of a franchise model?

Answer 10

• immediate brand awareness and credibility

- mitigates risk

Question 11

is the process of funding a project or business venture by raising money via an internet-supported funding management system (i.e. GoFundMe, Kickstarter)

Answer 11

crowdfunding

Question 12

5 key factors influencing legal structure decisions when setting up a business

Answer 12

1. Ease of setup
2. Degree of control
3. Magnitude of risk
4. Financial capacity
5. Required skills

Question 13

business model where:

• 100% personally liable • 100% control of the business in ownership and making decisions

Answer 13

sole proprietorship

Question 14

A business formed by two or more individuals

Answer 14

partnership

Question 15

a written agreement among the partners that outlines the expectation of each partner and details how the partnership is going to work

Answer 15

partnership agreement

Question 16

refers to the liability obligation of partners as a result of a legal contract; partners can be held individuals liable for their share of the obligation (several), or fully liable for the full obligation (joint) in the event that the other parties to the agreement are unable to pay their obligations

Answer 16

joint and several liability

Question 17

is a written agreement among the partners that details the sale by one partner and the purchase by another of the business interest of the selling partner

Answer 17

buy-sell agreement

Question 18

a partnership that is made up of both general partners (at least one) and limited (passive) partners

Answer 18

limited liability partnership (LLP)

Question 19

• A business entity that, legally, is separate and distinct from the owners

Answer 19

corporation

Question 20

the legal process of setting up a corporation

Answer 20

incorporation

Question 21

is an appointed or elected body of a for-profit or NFP corporation that oversees and advises management on issues challenging the organization on behalf of its stakeholders and shareholders

Answer 21

board of directors

Question 22

corporations whose ownership is private; the share of stock of the corporation are not publicly traded

Answer 22

private corporations

Question 23

is an organization that facilitates the trading of securities, stocks, commodities, and other financial instruments, exchanges provide a platform for selling these financial instruments to the public at large

Answer 23

exchange

Question 24

Can you move from a sole ownership > private corporation (external investors) > public corporation (IPO, shares publicly traded)?

Answer 24

yes

Question 25

what do NFP’s rely on for funding

Answer 25

external funding sources