Venture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies that can't raise funds through othermeans. 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 tomanage the company.A VC firm wants management to focus on improvingwhile the managers may also act to increaseVC investments have two typical components: (1) managers maintain some ownership in the company and often earn additional equity if the companyperforms well; (2) VCs demand seats on the company's board.Management ownership serves tothe alignment of the incentives of managers with the incentives of owners.

Ownership Business- The state of owning something, possession of something, and the right to own…

Answered: Venture capital (VC) firms are pools of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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?
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
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.
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?
Shareholders want managers to maximize the (Click to select) dividend expected return financial assets higher lower market value opportunity cost of capital real assets shareholders of their investments. The firm faces a trade-off. Either it can invest its cash in (Click to select) dividend expected return financial assets higher lower market value opportunity cost of capital real assets shareholders or it can give the cash back to (Click to select) dividend expected return financial assets higher lower market value opportunity cost of capital real assets shareholders in the form of a(n) (Click to select) dividend expected return financial assets higher lower market value opportunity cost of capital real assets shareholders and they can invest it in (Click to select) dividend expected return financial assets higher lower market value opportunity cost of capital real assets…
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
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.
Firms must provide the right incentives if they are to get -Select-shareholderscreditorsmanagersItem 1 to focus on long-run value maximization. Conflicts exist between managers and stockholders and between stockholders (represented by managers) and -Select-employeesdebtholderscustomersItem 2 . Managers' personal goals may compete with shareholder wealth maximization. However, managers can be motivated to act in their stockholders' best interests through (1) reasonable -Select-vacationcompensationperquisiteItem 3 packages, (2) firing of underperforming managers, and (3) the threat of hostile takeovers. If a firm's stock is undervalued, corporate raiders will see it as a bargain and will attempt to capture the firm in a hostile takeover.-Select-StockholdersBondholdersItem 4 generally receive fixed payments regardless of how well the firm does, while -Select-stockholdersbondholdersItem 5 earn higher returns when the firm's earnings are higher. Investments in -Select-riskysafeItem…
A venture capitalist invests primarily his/her own money in a company, seeking a substantial return. true or false?
Question 6 is financing obtained from investment firms that specialize in financing small, high- growth companies and receive an ownership interest and a voice in management in return for their money. Debt financing Venture capital Equity financing Entrepreneurial capital O Corporate stock financing
Provide detailed explanation to the following questions 1. Explain the concept of venture capital funding with relevant examples 2. Using relevant illustrations, compare and contrast the workforce implications of the Baby Boomers generation with those of the Generation X. 3. Compare and contrast strategic alliances with joint ventures. Support your answer with relevant examples. 4. How is a business plan different from an executive summary?
Private equity firms improve the performance of firms in which they invest by: making sure that the firms have the best possible management teams. closely monitoring each firm's performance and providing advice and counsel to the firm's management team. facilitating mergers and acquisitions that help improve the competitive positions of the companies in which they invest. All of the above are correct.

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