Question

True/False (T/F)

_____1) The primary advantage of equity capital is that it does not have to be repaid with   interest.

_____2) The most common source of equity funds used to start a small business is an

SBA loan.

_____3) If an entrepreneur is not willing to risk funds in a business venture, other

potential investors and lenders are not likely to provide capital either.

_____4) Venture capital companies reject 90% of the proposals they receive because

they don't meet the firms' standards.

_____5) The majority of venture capital firms that provide capital to small

businesses strive to not be involved in running the business.

_____6) In an initial public offering, a company raises capital by selling shares of its

stock to the general public for the first time.

_____7) Generally speaking, all growing companies need to borrow money at some

point.

_____8) A small business owner should avoid borrowing money when he/she sees a downturn

in business or to refinance existing debt.

_____9) Commercial banks are lenders of last resort for small businesses.

_____10) A business owner does not pay interest on a floor-planned item in inventory until it

is sold.

_____11) Even companies whose financial statements are too weak to produce other types

of loans can get asset-based loans.

_____12) Trade credit, while more difficult to obtain than bank financing, is a

somewhat important source of financing to most established companies.

_____13) Insurance companies specialize in long-term loans.

_____14) The majority of loans provided by the SBA are direct.

_____15) Site selection begins with considering what city in which to locate and

then broadening the search to consider the region and state.       

_____16) The first phase in selecting a location is determining what regions of the

country are experiencing substantial growth.

_____17) When analyzing the labor supply, a small service business is only concerned

with the level of education and training of the labor force in the area.

_____18) The trends or shifts in population components, such as population age, have

more meaning for the small business owner than total population trends.

_____19) Criteria for a "good location" are universal and apply to all types of

small businesses.

_____20) When doing a traffic count, the total number of shoppers passing by is the

critical factor in evaluating the site.

_____21) It is critical for all retail and service businesses to be located as far

from competitors as possible.

_____22) Lighting is an inexpensive investment for improving employee performance

and the overall appearance of the business.

_____23) Most entrepreneurs can neglect the purchasing function because they buy so little

from vendors they don't gain anything by spending time working on improving it.

_____24) The purchasing plan is developed independently from other functional areas of

a business.

Answer 1

1) This statement is TRUE.

This is because, when one uses equity share capital, there is no obligation to pay any sort of interest payments to the equity investors and that is the biggest advantage of equity capital.

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