1. Which of the following express the capability of a
Which of the following is a critical issue to manage in
company to generate operating profit? EV/EBIT
2. Which is the requirement for AMC? chọn 2%
3. Why is company valuation important within PEI? →
Depending on the value of the VBC the PEI will choose either to buy
existing or newly issued shares.
4. What is replacement financing? - Financing in the mature
age o a company and the role o the PE investor is to replace
an existing shareholder
5. The main difference between VCF in the US and UK? →
no difference
6. Consider the DCF model. Which among the following
effects on equity value is correct? - The higher the WACC
is, the lower the equity value is.
7. When is it better to use only the multiples method,
rather than using it together with the DCF model? - Very
rarely, when possible you should use them together
8. In the managerial process, the closing activity occurs
or… -venture capital funds, as well as for closed-end funds.
9. What is the main difference between the VCM and the
DCF model? - The VCM aims at finding the price of the
shares bought by the PE, whereas the DCF aims at finding the
equity value
10. What is meant by board services: one of the actions
taken by the PE to create value in the "managing and
monitoring?"
11. According to the European Format, who can invest in
PE? - Banks, closed-end funds, investment firms
11. When does vulture financing generally take place? -
When a company enters its decline phase or files or
bankruptcy
12. Why is protection not always granted during a PE
deal? - The deal is the outcome of a negotiation process/
There is no authority regulating the PE deals.
13. Why is it difficult to find a potential buyer or the
participation the PE owns? -The liquidity of the stake is very
low/ The price is not defined by the market, establishing a high
difficulty in its determination.
14. Why should a company choose PE over a mortgage or
loan? - Besides the provision of financial aid, the PEI
becomes an active owner of the company./ The fact that the
PE is also a shareholder makes them really interested in
enhancing the company’s value
15. Is the price of PER share higher or lower than the one
o a public company? - There is no specific rule: The price is
the result of negotiation.
16. What is the twofold nature of PE? - PE is a source of
financing and investment
17. What is the certification benefit? - A PEI invests a lot of
time in the screening phase to scout a VBC. When a company
is selected that means that it has growth potential./ When a
PEI invests in a company the latter is a trustworthy company
18. What is the main difference between Restructuring
and Distressed Financing? - Restructuring occurs when the
company is still alive, whereas Distressed financing occurs
when the company is dead
19. What is the right kind of financing in the development
phase? - Family and friends
20. When does the development phase occur? - When the
company does not exist yet
21. Why is the put option used in startup financing as a
risk mitigation tool by the PE investors? - In order to sell
the shares the investor bought back to the entrepreneur
22.
seed financing? - Having a full knowledge of the industry
23. What is an AMC? - A financial institution managing a
closed-end fund
24. Which of the following can happen in the fundraising
phase of a closed-end fund? - Collection can come to an
end before 18 months, the maximum allowed by law.
25. What is a VCF? - An Anglo-Saxon instrument investing in
any kind of PE
26. Which of the following concerning SBICs is true? -
SBICs involve a public admin that must hold 50% of its equity.
27. How do banks usually participate in PE? - They invest
in closed-end funds and so that they can participate in PE
activities.
28. What is participation exemption? - A mechanism in
which there is a lower level of taxation on capital gain when
some conditions occur/ A fiscal benefit granted to PEIs
29. What is true about private debt funds? - In this case the
same vehicles usually investing in private equity decide to
invest in private debts rather than in PE.
30. Whom are the fiscal incentives to startup considered
relevant to? - The venture-backed company
31. Suppose there is a fund with the following features:
Fund Global IRR: 350%; Hurdle Rate: 8%; Fund Carried
interest: 106%; Final Amount: 1,929
Find the remunerations for the managers 454.39
1) committed capital: FINAL VALUE/(1+GLOBAL IRR) =
1929/(1+350%) = 428,67
2) Remunerations =106% * 428,67 = 454,39
32. How long does it take to make all shareholders
subscribe to the total amount of the fund? - 1.5 years in a
European fund
33. What occurs in the investing phase? - Managers have
to deal with the valuation of potential investments
34. When talking about fundraising in the managerial
process, what is the “proposal?” - A business idea leading
to the creation of the vehicle that will invest in PE
35. Which among the following statements about the “job
selling” is FALSE? - Regardless of the country in which the
legal entity is based, “job selling” is always followed by the
closing phase
36. What is meant by “successful closing?” - When the PEI
can collect all the money necessary to start the PE activity.
37. Rank the following steps occurring in the decision-
making phase from the most to the least expensive and
demanding for the PEI.- Decision to invest, rating
assignment, screening
38. What is the main goal of the screening step in the
investing phase?- To find the potential venture in which the
PEI will invest
39. Which among the following statements about the
negotiation step in the investing phase is true? - The
actors involved have to calculate the number of shares the PE
firm will own.
40. Select the right circumstance when it is better to make
a direct investment rather than an indirect one for the PEI
when it has to decide on a vehicle to invest in the deal-
making phase: -There is a very high commitment from the
investors with respect to the VBC.
41. What is true about the write-off in the existing phase? -
It may occur when the VBC defaults.
42. Which of the following is a critical issue to manage in
seed financing? -Giving strong support to manage strategic
decisions.
43. What is true about Vulture Financing? - It’s the
separation into two different deals deriving from two different
ways of regulation.
44. What is the “poison pill”? - The PEI buying a valuable
asset mandatorily together with other less valuable assets
45. What is the financial benefit for a company when
financed by a PE? -The positive effect PE has on the cost of
capital.
46. What is the big difference between PIPE and the other
PE activities? -PIPE deals with a company whose shares are
listed on a stock exchange.
47. Why is the PE market very crowded when a company
needs money to finance its internal growth? - Because it is
not a complicated activity for a PE.
48. Why is seed financing very risky? - Not every idea can
generate a marketable output.
49. What is the knowledge effect? - Hard and soft
knowledge that can be transferred to a company by a PEI
50. What is the biggest advantage of crowdfunding? -
Those who need capital can launch an offer on the internet
and see whether they are able to collect the amount needed.
51. What are some of the risks on the investors’ side for
which one should take actions to protect value? - Wrong
industrial management decisions
52. Which of the following is correct? - After the end of the
closed-end fund, the maximum extra-time allowed is three
years.
53. What is an LLP? - A legal entity working like an AMC in
Europe created by the GPs in order to protect themselves
54. What is a trust? - A vehicle used to invest in PE in which
the management company is played by a trustee
55. What does "being fully liable '' mean in the
management of a VCF? - The GPs are responsible or the
liabilities of the VCF
56. Which of the following is a characteristic of VC? - PEI
has a hands-on approach.
57. Which of the following statements describes the
mechanism of a PE investment? - The PEI injects cash in
the VBC and gets equity
58. Which of the following is a feature of seed financing? -
The managerial involvement is very low. The investor has to
develop his or her ideas.
59. What is one thing that determines the approval or
denial the establishment of an AMC - Minimum
requirements to operate
60. How does a VCF work? - GPs, like the AMC…
61. What is true about remuneration in a SBIC? - Both
group of shareholders receive management fees
62. Which among the following statements concerning
taxation and the incentives to startup is correct? - The
mark-down mechanism entrails a reduction in the tax rate
without any particular conditions
63. Which of the following statements about the
managerial process is true? - Investing, managing &
monitoring, and existing may potentially start at the same time
64. What are the typical steps of the fundraising activity of
the managerial process? - Creation of the business idea,
selling jobs, debt raising and closing.
65. In the managerial process, during the fundraising
phrase, the debt raising activity… - occurs only for funds
with specific features.
66. In which phase does the PEI decide the destination of
the money collected over the managerial process? -
Decision-making
67. What is meant by “managing” as a part of the
managerial process? - The PEI has to make sure the
company generates value and they have to take actions to
create it.
68. What is trade sale? - It is the sale of the stake of VCB to
another corporation and entrepreneur.
69. What is the enterprise value? - If some conditions occur,
the enterprise value is equal to the sum of the cash flow
generated by the VBC at the time of the valuation and the
terminal value.
70. Which among following multiples better expresses the
capability of the company to generate gross margin? -
EV/EBITDA
71. How are cash flows called within the DCF model? -
Free Cash Flow
72. Using the DCF model: Say company has: total assets =
120; equity =40; Beta unlevered = 0,75; tax burden = 20%.
Find Beta: Beta = 0,75*[1+(1-0,2)*(80/40)] = 1,95
73. Compute the Equity Value given
Enterprise Value = 150; SA = 56; TV = 25
Equity Value = EV + SA = 150+56 = 206
74. Why can not a PE use the DCF model at time N? -
There is no business plan.
75. When is the VCM used? - When it’s difficult to determine
the percentage of the investment hold by the equity investors
76. Use the VCM to find the right % of shares the PE
should have: Value of investment = 3,800,000; IRR =40%;
Holding period = 4 years; Net Income (Year N) = 2,600,000;
PE ratio = 13
1) FV of the investment = 3,800,000 (1+40%)^4 = 14,598,000
2) Terminal Value = 2,600,000 x 13 = 33,800,000
3) % shares = FV/Terminal Value = 43,19%
77. What is the biggest drawback of the DCF? - You need
to rely on a sound business plan
78. What two moments from the investing phase? -
Decision-making and deal-making
79. What is the biggest trade off when calculating equity
value? - The PEI wants the equity value to be as low as
possible in the beginning of the investment while the value has
to be as large as possible at the end of the investment.