When Evaluating the Prospects of a New Venture, Venture Capital

question 55

Multiple Choice

When evaluating the prospects of a new venture, venture capital firms consider the characteristics of the entrepreneur and its team. Which of the following is not part of the review of the entrepreneur/team?

• A) its background and experience
• B) its managerial capabilities
• C) management's stake in the firm
• D) the VC firms' ability to cash out
• E) the capability to sustain an effort

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Definitions:

Average Tax Rate

The ratio of total taxes paid to total income, representing the percentage of income that goes to taxes.

Income

The money received by a person or household from various sources like work, investments, or benefits, typically used for consumption, savings, and investing.

Equity

The value of an ownership interest in property, including shareholders' equity in a corporation, representing assets minus liabilities.

Efficiency

The optimal allocation of resources to maximize the production of goods and services, ensuring that these are distributed in the most effective manner.