Misc CEcD test questions Flashcards
What is the “Triple Bottom Line”?
The 3 “P’s”
People
Planet
Profit
The triple bottom line aims to measure the financial, social, and environmental performance of a company over time.
TBL theory holds that if a firm looks at profits only, ignoring people and the planet, it cannot account for the full cost of doing business.
Define Gap Financing.
Loan required by a developer to bridge the gap (i.e. to make up a deficiency b/w the amount of mortgage loan due on project completion and the expenses incurred during construction (financing that covers the difference b/w what a project can support and the cost of development)
Define “Conflict of Interest” statement.
A conflict of interest occurs when a person’s or entity’s vested interests raise a question of whether their actions, judgment, and/or decision-making can be unbiased.
When an entity or individual becomes unreliable because of a clash between personal (or self-serving) interests and professional duties or responsibilities.
In business, a conflict of interest arises when a person chooses personal gain over duties to their employer, or to an organization in which they are a stakeholder, or exploits their position for personal gain in some way.
Business Retention and Expansion programs enable a community to:
1) survive economic difficulties
2) assist with expansions that add new jobs
3) increase their competitiveness in the wider marketplace
What type of investment doesn’t require state registration?
Insurance Companies
Define economic development
Program, group of policies or set of activities that seeks to improve the economic well-being and quality of life for a community by creating and / or retaining jobs that facilitate growth and provide a stable tax base.
Which of the following is NOT a role of the economic developer?
“Financier”
Utility companies are involved in business retention and expansion (depending on their policies) by:
- discounted rates
- information on available land / buildings in their service area
- energy audits to help companies reduce energy consumption
- revolving loan funds and grants to small companies and NPOs
- low cost financing for local businesses
- assistance with establishing programs to export products or services
Greenfield Development
Takes place on large tracts of land of previously undeveloped property in rural or suburban areas;
Provides competitively priced land
Fosters new job creation
Business Retention & Expansion Surveys - Follow-up timeline and tasks associated with: Immediate Short term Medium term Long term
Immediate - w/in 2 days; review surveys for assistance requests; flag any immediate risks for rapid response
Short Term - w/in 2 weeks; send thank-you; tabulate results; create file for completed surveys
Medium Term - w/in 4 weeks; ensure agencies have responded to all requests for services
Long-Term - 3-4 mths; update firms on progress in dealing with community-wide issues that impact the business climate
Redevelopment / Reuse
Processes for taking previously developed property to a higher, more productive use.
Redevelopment refers to new construction (possibly with demolition) or the process to improve an area through both new construction and property reuse.
Reuse refers to the renovation or rehabilitation of an existing building
Both encourage infill rather than sprawl, makes use of existing infrastructure and helps remove slums and blight.
Difference b/w Debt Capital and Equity Capital
Debt Capital - $$ loaned to be paid back in fixed installments on a fixed schedule; reduces the amount of equity and thus increases the variability of return on equity investment (i.e. leverage)
Equity Capital - ownership investment in a project with no predetermined schedule for payback; bridges the gap b/w debt financing and cost of the project; subordinate to debt financing
Difference b/w Debt Financing and Equity Financing
Debt Financing (i.e. loan) is a capital investment made by commercial banks that must be paid back within a specific time period based on a pre-established schedule; includes loans, bonds, transfer of capital; in return for lender’s investment, interest is charged.
Equity Financing is a capital investment that does not obligate repayment of the investment; in return for the investment, equity investors receive partial ownership in the venture; investors expect to benefit from expected appreciation in the value of their share and the payment of a portion of the earnings or dividends when the entity is profitable.
Who are the public sector players in real estate development projects and what roles does each play?
Local Gov’t (planning / zoning depts; public works depts; building inspectors) - fill the role of regulator (regulating rights of property owners, overall public interest, police power, protection of health, safety and welfare of citizens)
Economic Development Organizations (NPOs, EDOs, Chambers, redevelopment authorities, BIDs, etc.)
- fill role of facilitator (facilitating regulatory approvals, providing partial financing, providing infrastructure, improving streetscape, implementing a facade program)
- fill the role of initiator (when the EDO acquires property for development and has the following: a strong need to redevelop the property; political will to withstand the risks of development; and has expertise and resources to develop the property)
What are the characteristics of a small business?
- Innovation (more innovative in terms of product and processes)
- Community Ties (less likely to relocate and more likely to hire local residents)
- Flexibility (adapt more quickly to rapid changes in market demand)
- Limited Capital (half of small businesses start with less than $20K)
- majority fail w/in first 18 mths of operation
- 40% of start-ups survive the first 5 years; 10% survive the first 10 years
- majority offer lower wages and fewer benefits
Define business incubator
Entity that nurtures and supports young companies until they become viable, providing them with affordable space, technical and management support, equity and long-term debt financing & employment.
The 3 basic objectives in creating an incubator are 1) to spur technology-based development; 2) to diversify the local economy; and 3) to assist in community revitalization.
Define technology incubator
It’s a business incubator program with the specific objective of fostering innovation and developing creative technology ideas, often requiring specialized equipment, labs, facilities, etc.
They are generally affiliated or supported by universities because of the financial, technological and research resources available at these institutions in order to commercialize their products.
3 main components:
- innovation friendly space
- technology assistance
- access to financing
What is the difference b/w:
Business Incubator
Technology Incubator
Business Accelerator
Business Incubator supports young companies until they become viable - low rent office space; shared support services; network oppys
Technology Incubator focuses on innovation and high tech businesses - affiliated with universities for access to financial, tech and research support
Business Accelerator gives developing companies access to mentorship, investors and other support that help them become stable, self-sufficient businesses.
Companies that use business accelerators are typically start-ups that have moved beyond the earliest stages of getting established. They have moved beyond incubator stage and entered their “adolescence,” meaning they can stand on their own two feet but need guidance and peer support to gain strength.
List the benefits to establishing an incubator program from the business perspective.
- Lower rent costs
- Support services (admin, office equipment use, labs, training, consulting, mgmt advice, etc.)
- Networking oppys (share ideas and resources)
- Access to employment (universities, research hospitals, other incubator businesses)
- Access to funding sources
- Partnership development
What is break-even analysis?
The exact sales level at which sales cover costs. The venture will neither make money or lose money.
It helps ensure the variable costs will remain at acceptable levels as sales grow. It can establish several break-even points for different sales and cost estimates (best, worst and most likely) that a business could encounter.
Calculated as:
Fixed Costs / Gross Margin x Variable Costs
What are technology clusters?
Concentrations of interdependent firms related through their industry activities. They can be linked 1) vertically - buyers and sellers; or 2) horizontally - competing businesses in similar markets or that share resources.
Clusters enhance the competitive advantage of a region by enhancing the technology sectors that show great potential for growth and diversification, to become a strong base of the economy.
What are the 2 driving forces of technology innovation?
Technology-Push - when an inventor develops an idea, product or service it is NOT in direct response to a market demand.
Technology-Pull - when an inventor attempts to fulfill an unmet need of an existing market, or how to meet a particular need.
List the innovation drivers
Presence of research institutions Access to capital Support of entrepreneurial development Foreign Direct Investment Educated & talented workforce State and local commitment Established technology infrastructure Broadband infrastructure Quality of place
What is the difference b/w technology deployment and technology commercialization?
Tech Deployment - A) activities that assist businesses in applying advanced available technologies in their existing operations, or (B) activities that assist businesses in the development and manufacture of new products derived from advanced available technologies
Tech Commercialization - when a technological innovation is brought to the marketplace, it’s called commercialization. It includes activities from concept development to product manufacture; transitioning technologies from the research lab to the marketplace & can occur through 1) data / information; 2) know-how / expertise; 3) right to make / use / sell; or 4) embedded technology in software / machinery
Define gap analysis
A gap analysis process allows organizations to determine how to best achieve their business goals. It compares the current state with an ideal state or goals, which highlights shortcomings and opportunities for improvement.
What are the Neighborhood development strategies?
Most effective when used in combination with each other.
1) Community Building - neighborhood-wide, social events to encourage active participation in the community.
2) Place Oriented - focuses on enhancing the quality of nature as well as the built environment to create and maintain a place where existing residents want to stay.
3) Business Oriented - focuses on providing financial and technical support to neighborhood businesses to help them face challenges; create jobs; increase the tax base; encourage local shopping; improve quality of life
4) Workforce Development - critical to business retention & expansion; a well-trained workforce, combined with effective training programs, can give a community a competitive advantage, because it cannot be easily duplicated.
List the advantages and disadvantages of Public-Private EDO’s
Advantages:
- Greater flexibility in conducting ED activities
- Greater degree in hiring, firing, salaries, etc.
- Not part of a gov’t structure and have more autonomy
- Can take greater risks (no public elections / office)
- Can use public resources and powers without public limitations
- Funding from both public and private sources
- Can eventually be financially self-supporting thru mgmt, service fees and membership dues
Disadvantages:
- Limited accountability becuz it’s not under the same degree of public control as public agencies
- Limited accountability could impact their public or private sector representation on their board
- Limited accountability can restrict their freedom of action
What is the difference b/w the SBA 504 and SBA 7(a) programs?
SBA 504 - provides long-term, fixed rate financing to small businesses for major fixed assets (land, buildings, equipment).
- includes a secured loan with a senior lien from a private lender & covers up to 50% of project costs
- includes a secured loan with a junior lien from the CDC (backed by 100% SBA-guaranteed debenture) & covers up to 40% of the cost
- includes a 10% equity contribution from the small business
SBA 7(a) - general business loan program
- Zero subsidy loan program financed through fee income to the SBA from borrowers & lenders
- offers extended repayment terms; negotiated interest rate; can apply for either working capital or fixed assets
- Eligibility criteria include:
1) operate for-profit
2) meet SBA definition for small business
3) do business in the USA
4) have reasonable invested equity
5) use alternative funding sources (personal assets) before seeking financial assistance
6) demonstrate a need for loan
7) use funds for sound business purpose
8) not delinquent on other outstanding debt
What is the difference b/w a Community Development Corporation (CDC) and a Bank CDC?
Community Development Corporation - Non-profit orgs that can obtain federal and private support
- governed by local residents, businesses & community leaders through BOD elected from CDC membership
- serve impoverished populations
- most work on housing issues (altho some do economic development)
Bank CDC - bank sponsored community development corporation is a way for banks to contribute to economic revitalization by investing in local businesses or real estate investment projects that benefit low-moderate income groups.
What is the difference b/w monitoring, evaluation and benchmarking?
Benchmarking - quantifiable measures of economic competitiveness and quality of life that can be collected on a regular basis. Use to measure a region’s economic status and progress against comparable regions. (The standard by which something is measured.)
Monitoring - tracks performance or outcomes; is essential for carrying out the evaluation of the project.
Evaluation - compares outcomes to specific benchmarks with the purpose of judging a program, improving its effectiveness, and/or informing programming decisions.
What is the difference b/w business climate and quality of life?
Business Climate - usually referred to as the attitude of local gov’t toward business, but can also consider attitudes of the labor force and local business networks.
Quality of Life - aka general living conditions; describes the cultural, historical, recreational, natural and other characteristics of a community; subjective; no measurable definition
- includes housing availability, public services, educational system, crime rate, cultural / recreational activities, personal taxes, etc.
What is the Comprehensive Environmental Response, Compensation & Liability Act (CERCLA) or “Superfund”
- Started in 1980
Objectives:
1) provide a means of identifying and ranking hazardous waste sites;
2) create a source of funds to finance site clean up;
3) establish liability to both damage caused and cleanup among site owners, businesses generating the waste, waste haulers and wast disposal operators.
What is the Small Business Innovation Research (SBIR)?
SBIR funds high-risk research & development efforts with excellent commercial potential.
The purpose of the program is to
1) stimulate technological innovation
2) bring small businesses into the federal R&D process
3) encourage participation by disadvantaged and minority persons
4) increase private sector commercialization of federal R&D
