Understanding How Businesses Raise Financial Capital

6. When a firm has a record of at least earning significant revenues, and better still of earning profits, the firm can make a credible promise to pay interest, and so it becomes possible for the firm to borrow money. There are two main methods of borrowings:

a. banks

b. bonds

c. all of these

8. Bank borrowing is __________customized than issuing bonds, so it often works better for relatively small firms.

a. more

b. less

9. ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ is termed as the lifeblood of a firm.

a. Employee

b. Finance

c. Management

d. Technology

10. Debt capital refers to:

a. money raised through the sale of shares.
b. funds raised by borrowing that must be repaid.
c. factoring accounts receivable.
d. inventory loans.

12. A firm’s first sale of stock to the public is called an ________________________________.

a. stock trade

b. stock listing

c. initial public offering (IPO)

13. A firm can make a direct payment to its shareholders, called a ___________.

a. interest

b. dividend

c. reward

14. The increase in the value of the stock (or of any asset) between when it is bought and when it is sold is called a _____________.

a. value gain

b. capital gain

c. volume gain

15. A private company can be run by individuals, in which case it is called a ____________________.

a. sole partnership

b. sole proprietorship

c. partnership

1. When a firm needs to buy new equipment or build a new facility, it often must go to the ________________ to raise funds.

a. forex market

b. product market

c. financial market

2. ___________________ bridge this gap between those seeking funds for investments and the suppliers of financial capital. 

a. Foreign exchange market

b. Financial capital markets

3. Firms that are just beginning often have an idea or a prototype for a product or service to sell is at the early stage of financial capital. The sources of capital to them include:

a. Savings of the owner of the business

b. Venture capital

c. both a and b

4. ________________ firms make financial investments in new companies that are still relatively small in size, but that has the potential to grow substantially.

a. Angel investors

b. Venture capital

5. The sources of financial capital for businesses include:

a. Early-stage financial capital

b. profits as a source of financial capital

c. borrowings

d. all of these

7. A ___________ is a financial contract: a borrower agrees to repay the amount that was borrowed and also a rate of interest over a period of time in the future.

a. bank loan

b. bond

11. ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ refers to the activity of transforming savings into investment.

a. Resource development

b. Capital formation

c. Credit syndication

d. None of these