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Finance
Q:
Forecasting for firms with operating histories is generally much easier than forecasting for early-stage ventures.
a. True
b. False
Q:
A firm with a positive growth rate in sales will require some additional funds, assuming the existing ratios will not be changed.
a. True
b. False
Q:
The rate at which a firm can grow sales based on the retention of business profits is known as the sustainable sales growth rate.
a. True
b. False
Q:
Increases in accounts payable and notes payable are examples of spontaneously generated funds.
a. True
b. False
Q:
Sales forecasting accuracy is usually highest during a venture's startup stage in its life cycle.
a. True
b. False
Q:
When using the beginning-of-period equity base, the sustainable sales growth rate is equal to ROE times the retention ratio.
a. True
b. False
Q:
Internally generated funds is the cash produced from operating a firm over a specified time period.
a. True
b. False
Q:
The percent of sales forecasting method must project all cost and balance sheet items at the same growth rate as sales.
a. True
b. False
Q:
Sales forecasting accuracy is usually lowest during a venture's development stage in its life cycle.
a. True
b. False
Q:
Financial capital needed (FCN) is the amount of funds needed to acquire assets necessary to support a firm's sales growth.
a. True
b. False
Q:
The constant ratio forecasting method makes projections based on the assumption that certain costs and some balance sheet items are best expressed as a percentage of sales.
a. True
b. False
Q:
A customer-driven or "bottom-up" approach to forecasting sales is used primarily to forecast industry sales growth rates.
a. True
b. False
Q:
The added costs associated with obtaining equity capital are based on investor expected rates of return and are explicit costs which affect AFN.
a. True
b. False
Q:
Indicate whether the statement is true or false.The cost of obtaining additional funds, such as additional interest expenses from borrowing funds, may be explicit and impact AFN.a. Trueb. False
Q:
Regulation A allows for registration exemptions on private security offerings so long as all investors are considered to be financially sophisticated.
a. True
b. False
Q:
Regulation of investment companies (including professional venture capital firms) is carried out under the Investment Company Act of 1940.
a. True
b. False
Q:
Ventures in the rapid-growth stage often need to seek new investors through large private or public offerings.
a. True
b. False
Q:
SEC Rule 147 provides guidance on the issuer's diligent responsibilities in assuring that offerees are in-state and that securities don't move across state lines.
a. True
b. False
Q:
Blue-sky laws are federal laws designed to protect individuals from investing in fraudulent security offerings.
a. True
b. False
Q:
The objective of the Jumpstart Our Business Startups (JOBS) Act of 2012 is to stimulate the initiation, growth, and development of small businesses.
a. True
b. False
Q:
In general, while there are specific exceptions, public offerings of securities in the United States must be registered with the SEC.
a. True
b. False
Q:
Offerings and sales of securities are regulated under the Securities Act of 1933 and state blue-sky laws.
a. True
b. False
Q:
The life of a proprietorship is determined by the owner.
a. True
b. False
Q:
Regulation A issuers are allowed to "test the waters" before preparing the offering circular (unlike almost all other security offerings).
a. True
b. False
Q:
True-False Questions for Appendix BRule 502 of Regulation D focuses, in part, on resale restrictions imposed on privately placed securities.a. Trueb. False
Q:
A private placement, or a transaction by an issuer not involving any public offering, is exempt from registering securities.a. Trueb. False
Q:
Indicate whether the statement is true or false.It is usually easier to transfer ownership in a proprietorship relative to a corporation.a. Trueb. False
Q:
Which of the following rules under Regulation D has a $5 million financing limit?
a. Rule 503
b. Rule 504
c. Rule 506
d. Rule 507
Q:
The basic types of transaction exemptions from registration with the SEC are:
a. the private offering exemption and the accredited investor exemption
b. the "too-big-to-fail" exemption and the intrastate offering exemption
c. the accredited investor exemption and the public offering exemption
d. the intrastate offering exemption and the interstate offering exemption
Q:
Rule 506 of Regulation D is limited in terms of the number of unaccredited investors to:
a. 20
b. 25
c. 35
d. 40
Q:
Exemptions for private placement offerings and sales of securities limited to $5 million are covered under which of the following Regulation D rules?
a. Rule 501
b. Rule 502
c. Rule 503
d. Rule 504
Q:
Ventures that reach the survival stage of their life cycles and seek first-round financing are typically organized as:
a. proprietorships or partnerships
b. LLCs or corporations
c. corporations or proprietorships
d. partnerships or LLCs
Q:
Which of the following exemptions involves a public, and not a private, offering?
a. Regulation D: Rule 501
b. Regulation D: Rule 504
c. Regulation D: Rule 506
d. Regulation A
Q:
While Section 4(a)2 does not limit the dollar amount of an offering, the interpretation of the law has stipulated that the:
a. investors must be sophisticated
b. number of investors must be limited to 35
c. funds must be raised within a 12-month period
d. offering must be extended to the public, and not only investors who have a relationship with the issuer
Q:
Which of the following statements regarding securities law is not true?
a. ignorance is an acceptable defense
b. security regulators may alter your investment agreement to the benefit of the investors
c. the Securities Act of 1933 gives the SEC broad civil procedures to use in enforcement
d. the Securities Act of 1933 gives the SEC some criminal procedures to use in enforcement
Q:
The returning of all funds to equity investors as a common remedy for a fouled-up securities offering is called:
a. just action
b. fraud
c. second-round financing
d. a rescission
Q:
The U.S. federal law that impacts the creation and sales of securities is the:
a. Securities Exchange Act of 1934
b. Securities Act of 1933
c. Investment Company Act of 1940
d. Investment Advisers Act of 1940
Q:
Unless your security is exempted, what section of the Securities Act of 1933 requires you to file a registration statement with the SEC?
a. Section 1
b. Section 2
c. Section 4
d. Section 5
Q:
Multiple-Choice Questions for Appendix BRule 503 dictates that for all Regulation D exemptions, a Form D should be filed within how many days after the first sale of securities?a. 1 dayb. 15 daysc. 30 daysd. 90 days
Q:
Which title of the JOBS Act of 2012 established a small offering registration exemption involving the sales of securities to an Internet "crowd"?a. Title Ib. Title IIc. Title IIId. Title IV
Q:
Which of the following is not a security?
a. treasury stock
b. debenture
c. call option
d. real property
Q:
Investor liability is unlimited under which of the following types of business organizational forms?
a. proprietorship
b. limited liability company (LLC)
c. C corporation
d. S corporation
Q:
Which of the following is not a requirement for registration of securities with the SEC?
a. the name under which the issuer is doing business
b. the name of the state where the issuer is organized
c. the names of all products sold by the issuer
d. the names of the underwriters
Q:
Multiple-Choice Questions for Appendix BWhich of the following is not a condition of a Regulation D offering under Rule 502?a. integrationb. sophisticationc. informationd. solicitation
Q:
Which of the following statements about Regulation A is not true?a. it is shorter and simpler than the full registrationb. it does not have limits on the number or sophistication of investorsc. it is a public offering rather than a private placementd. it requires no offering statement be filed with the SEC
Q:
Which of the following statements regarding the Securities Act of 1933 is not true?
a. it was passed in response to abuses thought to have contributed to the financial catastrophes of the Great Depression
b. it covers securities fraud
c. it requires securities to be registered formally with the federal government
d. it focuses on those who provide investment advice
Q:
In the Ninth Circuit Court of Appeals decision on SEC v. Murphy, all of the following were considerations in determining an offering to be a private placement except:
a. there must be an arm's length relationship between the issuer of the security and the prospective purchaser
b. the number of offerees must be limited
c. the size and the manner of the offering must not indicate widespread solicitation
d. the offerees must be sophisticated
Q:
The efforts to regulate the trading of securities takes place under which of the following securities laws?
a. the Securities Act of 1933
b. state blue-sky laws
c. the Securities and Exchange Act of 1934
d. the Investment Company Act of 1940
Q:
Which of the following statements about registering securities with the SEC is not true?
a. it is a time-consuming process
b. it requires the disclosure of accounting information
c. it is an inexpensive process
d. it provides information to prospective investors
Q:
Which of the following topics does Rule 502 of Regulation D cover?
a. accreditation and integration
b. integration, information, and accreditation
c. information, accreditation, and resale
d. resale, information, and accreditation
Q:
The primary exemption from the prohibition of resale of unregistered securities (including, but not limited to, securities safely harbored in Rule 506 offerings) is:
a. Rule 111
b. Rule 122
c. Rule 133
d. Rule 144
Q:
Multiple-Choice Questions for Appendix BRule 501 of Regulation D expands the categories of accredited investors. Which of the following is not one of the categories?a. any organization formed for the specific purpose of acquiring securities with assets in excess of $5 millionb. any director or executive officer of the issuer of securities being soldc. any individual whose net worth exceeds $1 milliond. any partnership
Q:
Rule 504 of Regulation D limits the total number of investors to:a. 35 total investorsb. 100 total investorsc. 35 unaccredited investors and any number of accredited investorsd. none of these choices; there is no limit on the number of accredited or unaccredited investors
Q:
Which of the following SEC registration exemptions has no financing limit and permits a maximum of 35 unaccredited investors?
a. Section 4(a)2
b. Regulation D: Rule 504
c. Regulation D: Rule 506
d. Regulation A
Q:
The JOBS Act of 2012 does not provide for which of the following?
a. establishes a new business classification called "Emerging Growth Company"
b. lifts restrictions on general solicitation and advertising for Regulation D 506 accredited investor offerings
c. changes the maximum amount to be raised under a Regulation A-like offering to $50 million
d. prohibits the use of securities crowdfunding for the sale of securities
Q:
Offerings exempted from registration under Rule 504 of Regulation D may raise up to $5 million in a:
a. 6-month period
b. 9-month period
c. 12-month period
d. 24-month period
Q:
Multiple-Choice Questions for Appendix BWhich of the following is a requirement of natural persons to be accredited investors under Rule 501 of Regulation D?a. net worth greater than $5 millionb. total assets greater than $1 millionc. individual (single) annual income greater than $200,000d. stock market portfolio greater than $2 million
Q:
State securities regulations are referred to as:a. Regulation A legislationb. stormy-day lawsc. blue-sky lawsd. SEC oversight legislation
Q:
Which of the following is not an exemption method for making an offering exempt from SEC registration?
a. 4(a)2 private offering
b. accredited investor
c. Regulation Z
d. Regulation A
Q:
Which of the following is not a characteristic of Regulation A?
a. an offering is limited to $50 million
b. the number of offerees or investors is limited to 35
c. the offering is a public offering
d. the securities issued can generally be freely resold
Q:
Which of the following statements about Regulation A is not true?
a. issuers are allowed to "test the waters" prior to preparing the offering circular
b. after filing a SEC statement, the issuer can communicate with perspective investors orally, in writing, by advertising in newspapers, on radio and on television, or via the mail to determine investor interest
c. issuers can take commitments or funds if the interest level is insufficient
d. the issuer can drop a Regulation A filing
Q:
None of the following create any securities registration responsibilities except:
a. securities issued by state governments
b. securities issued by publicly held companies
c. securities issued by banks
d. securities issued by the federal government
Q:
Which SEC regulation took effect in 1982 and provides the basis for safe harbor as a private placement?
a. Regulation A
b. Regulation B
c. Regulation C
d. Regulation D
Q:
Security exemptions from registration with the SEC do not include which of the following?
a. securities issued by banks and thrift institutions
b. government securities
c. intrastate offerings
d. securities issued by large, high-quality corporations
Q:
An offering that raises $10,000,000, involving 35 unaccredited investors and 100 accredited investors, might be exempt from registration under:
a. Section 4(a)5
b. Regulation D: Rule 504
c. Regulation D: Rule 506
d. Regulation A
Q:
Efforts to regulate the offerings and sales of securities take place under which of the following securities laws?
a. the Securities Act of 1933 and state blue-sky laws
b. state blue-sky laws and the Securities and Exchange Act of 1934
c. the Securities Act of 1933 and the Securities and Exchange Act of 1934
d. the Investment Company Act of 1940 and the Investment Advisers Act of 1940
Q:
SEC Regulation D took effect in 1932 and provides the basis for safe harbor as a private placement.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
Q:
Regulation A offerings are limited to $10 million and do not have limitations on the number or sophistication of offerees.
a. True
b. False
Q:
The two basic types of exemptions from having to register securities with the SEC are security and transaction exemptions.
a. True
b. False
Q:
According to the Investment Advisers Act of 1940, a bank would not be classified as an "investment adviser."
a. True
b. False
Q:
Rule 504 under Regulation D has a $2 million financing limit (i.e., applies to sales of securities not exceeding $2 million).
a. True
b. False
Q:
The typical business organization for a venture in its rapid-growth stage is a partnership or LLC.
a. True
b. False
Q:
A Rule 504 exemption under Regulation D has no limit in terms of the number and qualifications of investors.
a. True
b. False
Q:
State laws designed to protect high net-worth investors from investing in fraudulent security offerings are known as blue-sky laws.
a. True
b. False
Q:
SEC Regulation D requires the registration of securities with the SEC.
a. True
b. False
Q:
The Securities Act of 1933 provides a very narrow definition as to what constitutes a security.
a. True
b. False
Q:
The Securities Exchange Act was passed in 1933, and the Securities Act was passed in 1934.
a. True
b. False
Q:
True-False Questions for Appendix BOne of the monetary requirements for individuals or natural persons as accredited investors as defined in Rule 501 of Regulation D is individual annual income greater than $500,000.a. Trueb. False
Q:
A Regulation D: Rule 506 offering has no limit in terms of the dollar amount of the offering but is limited to 35 unaccredited investors.a. Trueb. False
Q:
Securities crowdfunding occurs when a large number of investors try to buy stocks at the same time.
a. True
b. False