What Is an Example of a Covenant in a VC

question 21

Multiple Choice

What is an example of a covenant in a VC investment deal?

• A) Preferred equity that also serves as debt instrument with an interest rate.
• B) Board seat(s) for the investors.
• C) Anti-dilution clauses so that the VC can preserve its current percentage ownership position, regardless of future investors.
• D) Placing founders' equity back as stock options which vest over time, or do not vest should the founders be asked to leave the company by the Board.
• E) All of the above.

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Definitions:

Cost Index

An index that measures the changes in the cost or price of specific goods or services over time.

FIFO Cost

FIFO, or First-In, First-Out, is an inventory valuation method where the costs of the earliest goods purchased or produced are the first to be recognized in determining cost of goods sold.

Dollar-Value LIFO

An inventory valuation method under Last-In, First-Out principle, adjusting for changes in price level or inflation, allowing for a more accurate financial analysis over time.

Inventory Items

Goods or products that a company holds for the ultimate purpose of sale, part of the current assets on a company's balance sheet.