Module 6

Question 1

equity investors

Answer 1

purchase portion of business w hopes of future returns thru capital gains or dividend payments

Question 2

long term debt

Answer 2

things like securing bond, where bondholder wants to receive specific rate of return in exchange for their investment

Question 3

short term loans

Answer 3

generally seen when gods or supplies are sold and payment is expected within 30-90 days

Question 4

finance charges

Answer 4

if you dont purchase an item with cash or debit you are assigned a finance charge
say money on finance charges if you can purchase with cash

Question 5

interest rate

Answer 5

cost of borrowing in % terms

Question 6

equity requirements

Answer 6

lenders generally mandate bc they show you are more likely to pay back loan

Question 7

credit rating

Answer 7

score that represents risk associated with offering loan or line of credit

Question 8

5 c’s of credit

Answer 8

determine whether or not to offer loan

Question 9

character

Answer 9

application truthfulness about credit history

Question 10

capacity

Answer 10

does business have ability to become profitable

Question 11

collateral

Answer 11

anything of value that can be offered to repay loan in case of default

Question 12

capital

Answer 12

equity applicant has placed into his/her own business

Question 13

condition

Answer 13

applicants opportunity to sell lender on viability of business

Question 14

small business administration (SBA)

Answer 14

created by us govt in 1953
aids counsels and protects nations small business community
works with lenders to provide loans and financing to small businesses

Question 15

sba will lend money if person has:

Answer 15

excellent credit (no collection letters in past 3 years)
no bankruptcies in past 10 years
business plan
collateral
1/3 of required capital needed to start business

Question 16

short term borrowing

Answer 16

repayment period expected to be 90 days or less

Question 17

accounts payable

Answer 17

represents amounts owed to vendors and suppliers for services that have been pr

Question 18

open market borrowing

Answer 18

free enterprise environment

Question 19

bank financing

Answer 19

signing up for a loan from bank
usually a bit simpler
flexible loan terms
prefer issuing shorter terms loans
less negotiating power regarding interest rates

Question 20

term loan

Answer 20

3-5 year loan

Question 21

balloon payment

Answer 21

large payment due at back end of loan
not fully amortized at end of loan until balloon
lower payments leading up to balloon

Question 22

kick starter

Answer 22

allows people to donate money toward cause or new business usually offering something in return if certain amount met

Question 23

mezzanine financing

Answer 23

available to established companies that show growth potential but are not ready to go public

Question 24

venture capitalist

Answer 24

investor who invests in private company and provides funds to firm in exchange for owning portion of company