Two Separate Entrepreneurs Have Approached a Potential Investor to Raise

question 38

Multiple Choice

Two separate entrepreneurs have approached a potential investor to raise money for starting up their new businesses. One entrepreneur has good experience and skills for the planned new business. The other entrepreneur has considerably less experience and skills. The potential investor does not know this and decides to invest in the new business proposed by the entrepreneur with less experience and skills because that person was a more convincing speaker. This demonstrates the idea of

• A) proforma financing.
• B) insolvent financing.
• C) adverse selection.
• D) self financing.
• E) mandatory redemption.

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Definitions:

Internment

The detention or confinement of people, often in large groups, without trial, especially during wartime; historically applied to the forced relocation and confinement of Japanese Americans during World War II in the United States.

Soldiers

Individuals who serve in an army and are trained to fight in military battles.