invest their funds in new businesses and help the management team get the firm to the point at which it is ready to "go public"; however, they aren't in charge of taking the firm public. O Asset management firms Investment banks O Venture capitalists Mutual funds

invest their funds in new businesses and help the management team get the firm to the point at which it is ready to "go public"; however, they aren't in charge of taking the firm public. O Asset management firms Investment banks O Venture capitalists Mutual funds

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter15: Harvesting The Business Venture Investment

Section: Chapter Questions

Problem 1bM

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invest their funds in new businesses and help the management team get the firm to the
point at which it is ready to "go public"; however, they aren't in charge of taking the firm public.
O Asset management firms
Investment banks
O Venture capitalists
O Mutual funds

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Venture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies that can't raise funds through other means. In exchange for this financing, VCs receive a share of a company's equity, and the founders of the firm typically stay on and continue to manage the company. A VC firm wants management to focus on improving while the managers may also act to increase VC investments have two typical components: (1) managers maintain some ownership in the company and often earn additional equity if the company performs well; (2) VCs demand seats on the company's board. Management ownership serves to the alignment of the incentives of managers with the incentives of owners.
Please help me.
We can imagine the financial manager doing several things on behalf of the firm's stockholders. But in well-functioning capital markets, shareholders will vote for only one of these goals. Which one? Multiple Choice Modify the firm's investment plan to help shareholders achieve a particular time pattern of consumption. Help balance shareholders' checkbooks. Choose high- or low-risk assets to match shareholders' risk preferences. Make shareholders as wealthy as possible by investing in real assets.
Venture capital firms: O A. Generally, provide capital to back an new company, with little or no record of success, and it managers B. Take an equity stake in the company O C. Are not passive investors D. Do not make outright loans O E. All of the above
Venture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies, which usually can’t raise funds through other means. In exchange for this financing, the VCs receive a share of the company’s equity, and the founders of the firm typically stay on and continue to manage the company. Describe the nature of the incentive conflict between VCs and the managers, identifying the principal and the agent. VC investments have two typical components: (1) managers maintain some ownership in the company and often earn additional equity if the company performs well; (2) VCs demand seats on the company’s board. Discuss how these two components help address the incentive conflict.
We can imagine the financial manager doing several things on behalf of the firm's stockholders. For example, the manager might: Make shareholders as wealthy as possible by investing in real assets. Modify the firm's investment plan to help shareholders achieve a particular time pattern of consumption. Choose high- or low-risk assets to match shareholders' risk preferences. Help balance shareholders' checkbooks. But in well-functioning capital markets, shareholders will vote for only one of these goals. Which one? Why?
When venture capitalists take an active role in the management of a company they finance, they are trying to alleviate the moral hazard problem. Group of answer choices True False
In Growth Mutual Fund the companies make investment of their funds in a. Young and growing companies b. Government securities c. Already proven companies d. Finance companies
Which of the following statements is true with regard to financial markets O a. They link the households which save funds and business firms which invest these funds: O b. They work as an intermediary between the savers and the investors by mobilising funds between them c. They allocate funds available for investment into their most productive investment opportunity d.All of the options
Early investors in new companies are known as: Angel Investors Portfolio Managers Sovereign Wealth Funds Pension Funds
Maximizing owners' equity value means carefully considering all of the following EXCEPT Multiple Choice how to best bring additional funds into the firm. which projects to invest in. how best to increase the firm's risk. how best to return the profits from those projects to the owners over time.
An investor provides an entrepreneurial firm with the capital that it needs to grow. over and above providing the capital, in what other ways can the investor add value to the firm? What are the possible downsides of having a venture capitalist as an investor in the business?