Introduction to entrepreneurship/IENT103/Financing/Quiz

The questions which follow provide a basic knowledge test of selected concepts covered in this learning pathway: Financing a new start-up.

The questions published at the end of each learning pathway are re-used for the knowledge test for learners interested in earning a digital badge or certificate of participation for the Financing a business start-up (IENT103) micro-course. Please consult the Certify participation page for more information.

True - false questions

Indicate whether the following statements are true or false:

• In the course materials for IENT103, four main categories for financing a business are specified.
  • True
    • Incorrect. IENT103 specifies two main categories for financing a business: debt funding and equity funding.
  • False
    • Yes, that’s correct.
• Debt funding is when investors provide money in exchange for a share of a company.
  • True
    • Incorrect. Debt funding is when you borrow money from a bank or finance company.
  • False
    • Yes, that’s correct.
• A capital raise is a process when a company issues new shares in exchange for cash.
  • True
    • Yes, this is true.
  • False
    • Incorrect. This is known as a capital raise.
• A start-up business rarely begins without some form of funding.
  • True
    • Correct. Well done.
  • False
    • Incorrect. The owner of the start-up may be able to use personal savings, but, in most cases, other funding will be needed.

Multiple choice questions

• Which ONE of these statements about crowdfunding is FALSE?
  • Crowdfunding is the use of small amounts of money from a large number of individual people, in order to raise funding for a start-up business idea.
    • This is true.
  • Crowdfunding uses social media and special websites to connect entrepreneurs with potential investors
    • This is true. Example websites include Kickstarter, GoFundMe, and Indiegogo.
  • Crowdfunding can be achieved through concerts or other similar public events
    • Well done! This is false. Crowdfunding is internet-based, using social media and other web platforms to spread the word about investment opportunities.
  • Many crowdfunding projects provide rewards of some kind based on level of the contribution, such as a gift / product sample(s), or the opportunity to participate in the launch of a new product
    • This is true.
• Which ONE of the following is the best description of seed capital:
  • Seed capital is a low-risk investment
    • No, this is incorrect. Seed funding is typically high risk.
  • Seed capital is the initial money used to finance a new business or new product
    • Yes, that’s right. Seed capital might come from personal savings, and/or from friends or family.
  • Seed capital is another name for Venture capital
    • No, this is incorrect. They can sometimes overlap, but venture capital is usually a more significant investment once a viable product concept has been proved, rather than initial investment in a start-up business.
  • Seed capital is typically one of seven phases for a start-up business raising finance
    • No, this is incorrect. A start-up generally goes through four distinct phases of investment before it is considered an established business.
• Which ONE of the following statements about Angel Investors is INCORRECT?
  • Angel investors are individuals who invest money in start-up businesses
    • This statement is correct.
  • Angel investors typically require equity or convertible debt in return for their investment
    • This statement is correct.
  • Angel investors know that this type of investment is typically high risk
    • This statement is correct.
  • Angel investors look after a pool of money from other investors, and choose which business opportunities to finance on their behalf.
    • You’re right! This is incorrect.
• Which ONE of the following statements about business loans is FALSE?
  • Business loans can be used to purchase equipment, vehicles, and/or property, and to cover other expenses
    • This statement is correct.
  • Borrowers usually have to pay a set-up or establishment fee for any business loan
    • This statement is correct. It is sometimes called an origination or administration fee.
  • Business loans can be offered with a fixed or variable interest rate
    • This statement is correct.
  • A business loan secured by collateral is usually under a higher rate of interest than a loan without collateral.
    • You’re right! This is incorrect. A loan against collateral usually has a lower rate of interest than an unsecured loan.