SBICs

question 25

Multiple Choice

SBICs:

• A)were chartered by the SBA to help start-up companies find private financing from commercial banks and finance companies.
• B)provide short-term debt-based capital to small businesses through the sale of the debt to private investors.
• C)cannot invest in or lend money to a business for more than five years.
• D)were created by the Small Business Investment Act to use a combination of private and federal guaranteed debt to provide long-term capital to small businesses.

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Definitions:

Externalities

Spillover effects of an activity that influence the well-being of nonconsenting parties.

Opportunity Cost of Capital

The potential return that is foregone by investing capital in one project rather than an alternative investment.

Stockholder Equity

The residual interest in the assets of a corporation after deducting liabilities, representing the ownership interest of shareholders.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the extent to which a firm has exceeded the break-even point.