Section 13: Corporate Financial Life Cycle

Question 1

How does Danny Devito value shares (New England Wire and Cable)

Answer 1

Assets - Liabilities

Question 2

Primary Roles/Goals of the SEC as a regulator

Answer 2

1. Protect Investors
2. Information Disclosure
3. Operational and Pricing Efficiency of Security Markets
4. Fair and Orderly Markets

Question 3

4 things the SEC oversees

Answer 3

Issuers
Investment Firms
Investors
Markets

Question 4

3 Procedural Elements of the SEC

Answer 4

Rules and Regulations
Enforcement Action
Provide for Full and Fair Disclosure of Information (quarterly and annual filing requirements)

Question 5

SEC filing that public companies must issue annually

Answer 5

10-K

Question 6

SEC filing that public companies must issue quarterly

Answer 6

10-Q

Question 7

Main thing the SEC does as a regulator

Answer 7

Instills confidence in the markets

Question 8

SEC Issues

Answer 8

Insider trading

Question 9

Objective of SEC Insider Trading Laws

Answer 9

Create a level playing field

Question 10

What does Rule 14e-3 of the SEC state

Answer 10

Cannot act on non-public info

Question 11

Two types of insider trading

Answer 11

Legal and Illegal

Question 12

Trading by corporate insiders who have non public information is considered

Answer 12

Legal insider trading

Question 13

Trading with material, non-public information 
SEC Rule 14e-3 
Do not have to be an insider 
Information is not well defined 
Monitoring has become better

Answer 13

Illegal insider trading

Question 14

Insider trading laws pertain to bother corporate

Answer 14

Insiders and outsiders

Question 15

Executives can buy/sell their own stock through

Answer 15

Prearranged 10b5-1 trading plans

Question 16

Who is the FBI’s new spokesman against insider trading

Answer 16

Gordon Gekko (Michael Douglas)

Question 17

5 stages of the financial life cycle

Answer 17

Owners Capital 
Bank Financing 
Venture Capital/Private Equity 
Security Offerings 
Mergers and Acquisitions

Question 18

Equity investments by investors in private companies

Answer 18

Venture Capital (Private Equity)

Question 19

The collective effort of individuals who network and pool their money to support business or social efforts

Answer 19

Crowd Funding

Question 20

Three things about crowd funding

Answer 20

Limitations on amounts invested and raised
Allows individuals to become angel investors
Usually via the Internet (Kickstarter, indigogo, gofundme, rockethub) etc

Question 21

Allows companies to raise online from investors with certain restrictions

Answer 21

JOBs Act 2013 (jump our business start-ups)

Question 22

Allows investors with lower net wealth to crowdfund

Answer 22

Title IV (2015)

Question 23

Allows non-accredited investors to crowdfund private offerings as well

Answer 23

Final Title III Rules (2015)

Question 24

3 criteria for Venture Capital

Answer 24

Risk Capital
Required Returns
Types of Financing

Question 25

What’s required for growth once bank financing is unavailable

Answer 25

Debt/Equity Capital

Question 26

Expected Return Depending on stage is

Answer 26

20-50%

Question 27

Venture capital exit strategy

Answer 27

Sell/IPO

Question 28

Initial sale of common stock to investors in market

Answer 28

Initial Public Offering (IPO)

Question 29

VC brings together what 3 people (makes a market for them)

Answer 29

Entrepreneurs (need funding), Private Investors (want high returns) and Investment Bankers (need companies to sell)

Question 30

VC is high (blank) risk

Answer 30

Capital

Question 31

Returns come with high levels of

Answer 31

Risk

Question 32

Return and risk (low to high) graph

Answer 32

``` Bonds (5%) Stocks (10%) Small Stocks (15%) Venture Capital (50%) Angels (70%) ```

Question 33

In venture capital financing, the earlier the stage

Answer 33

The higher risk and required return

Question 34

Levels of VC Financing

Answer 34

Seed/Startup (Angels) First Round (A Round) Intermediate/Second Round (B Round) Later Stage (C Round)

Question 35

Earliest stage of business, typically no operating history. Investment is based on a business plan, the management group backgrounds along with the market and financial projections

Answer 35

Seed/Startup Funding

Question 36

Typically funding that accommodates growth. Company may have finished R&D—tangible products. Funding is often in the form of convertible bond

Answer 36

First Round Funding

Question 37

Maturing company where a future leveraged buyout, merger or acquisition and/or initial public offering is a viable option. Funds are used to finance inventories, production, shipping, and accounts receivable

Answer 37

Intermediate/Second Round Financing

Question 38

Mature company where funds are needed to support major expansion or new product development. Company is profitable or breakeven

Answer 38

Later stage funding

Question 39

The Financing Rounds in a VC deal

Answer 39

``` Angel A round- .875 B Round - 2.28 C Round - 4.58 IPO - 24.00 First day trading - 126.00 ```

Question 40

What percent of venture capital deals go bust

Answer 40

Over 90%

Question 41

Average first day return for IPO’s

Answer 41

15%