Which One of the Following Statements Concerning Venture Capitalists Is

question 51

Multiple Choice

Which one of the following statements concerning venture capitalists is correct?

• A)Venture capitalists assume management responsibility for the firms they finance.
• B)Exit strategy is a key consideration when selecting a venture capitalist.
• C)Venture capitalists limit their services to providing money to start-up firms.
• D)Most venture capitalists are long-term investors in a firm.
• E)A venture capitalist normally invests in a new idea and finances that idea until the newly-formed firm can issue an IPO.

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Definitions:

Unlevered Firms

Companies that operate without the use of borrowed money or financial leverage.

M&M Proposition II

A theory proposing that the cost of equity for a leveraged firm increases linearly with its level of debt, holding the cost of debt constant.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements and is used in calculating the weighted average cost of capital.

Debt/Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets, often used to gauge financial health and risk.