Introduction to entrepreneurship/IENT103/Valuing/Quiz

The questions which follow provide a basic knowledge test of selected concepts covered in this learning pathway: Valuing 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:

• The EBITDA measure is a measure of a business’s operating performance.
  • True
    • Correct. This is true.
  • False
    • Incorrect. This is a standard measure of operating performance.
• The terms of financing options are based on the risk/reward principle
  • True
    • Correct, this is true.
  • False
    • Incorrect, the risk/reward principle is the basis for assessing financing options.
• Valuing a new start-up business utilises standard methods for evaluating businesses.
  • True
    • Incorrect. Valuing a new business can be difficult because there are no historical performance records to look at, so methods must be adapted for start-up businesses.
  • False
    • Correct.
• Low barriers to market entry represent a low risk for investors.
  • True
    • Incorrect. Low barriers to entry mean that new companies can enter the market easily. This represents a higher risk for investors.
  • False
    • Correct.

Multiple choice questions

• What is EBITDA short for?
  • Earnings Before Interest, Tax, Debt and Assets
    • Try again.
  • Earnings Before Investment, Trading, Deposits and Assets
    • Try again.
  • Earnings Before Investment, Tax, Depreciation and Amortization
    • Not quite. Have another go!
  • Earnings Before Interest, Tax, Depreciation and Amortization
    • Yes, that’s right!
• According to the IENT103 course, how many start-up businesses are likely to fail?
  • 2 out of every 5
    • Try again.
  • 4 out of every 5
    • That’s right! This might be discouraging, but remember that there are things you can do to prepare and minimise the risks.
  • 1 out of every 5
    • Unfortunately, this is too low. Try again.
• Which one of the following statements is the best definition of ‘break-even point’?
  • The break-even point is the point at which all bank loans have been repaid
    • Try again.
  • The break-even point is the point at which a start-up business enters a new market
    • Try again.
  • The break-even point is the point at which total revenue is equal to total expenses
    • You’re right! When a company does not make a profit or a loss, it breaks even.
  • The break-even point is the point at which fixed costs are equal to variable costs
    • Try again.
• Which one of the following statements about pre-money valuation is FALSE?
  • Pre-money valuation is the value you quote to a potential venture capitalist or other funding source to get funding for your business
    • This is true. It is essentially how you value your business.
  • Pre-money valuation can be based on marketing campaigns
    • This is false. Marketing campaigns may bring in more paying customers, which would impact the pre-money valuation, but marketing campaigns in themselves do not determine valuation.
  • Pre-money valuation can be based on the traction of the start-up business
    • This is true. Traction is about how long the start-up has been in business, and how fast it is growing (when compared with the competition).
  • Pre-money valuation can be based on brand value
    • This is true. Brand value is basically the same as brand awareness and brand recall; how aware consumers are of your start-up, your products, and/or your services.