Just a question...

Discussion in 'General Distance Learning Discussions' started by Ryan1984, Jun 17, 2006.

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  1. Ryan1984

    Ryan1984 New Member

    Hi,

    I don't really know where to post this, but I'm looking for a little help, so here goes:

    I'm enrolled in Penn Foster, doing their Accounting program. My question doesn't really relate to that, rather to the lesson I'm on right now.

    I'm going over my review questions, and well, one has me quite stumped.

    It's just an intro to business and I'm on the last chapter of my 800 page textbook (finally!)

    The chapter deals with how companies recieve money (investments: stocks, bonds, venture capital, etc.)

    Anyway, the question is this:

    The Finance Director of a startup radio station arranges for some additional funds for expansion of the business. The funds were raised in exchange for shares in the company. In addition, the board of the company was expanded with the addition of two new members from the investing company. This is an example of financing through:

    A. Stocks and Bonds
    B. Venture Capital
    C. Private Placement
    D. Trade Credit

    Myself, I am leaning towards Stocks and Bonds. Obviously, by selling stocks, the reciever now owns part of the company. Although, that is also true for venture capitalists. The part that has me really confused is that the investing company now makes up part of the board of directors.

    As I said, I am really confused on this, and cannot find anything on it in my textbook. I'm looking for business majors, or anyone who just has knowledge about this. I would greatly appreciate it.

    Thankyou,
    Ryan
     
  2. bill947

    bill947 New Member

    Ryan,
    I am not a student in business or accounting, but I would go with this. Venture capital:
    From Wikipedia, the free encyclopedia
    "Venture capital is capital provided by outside investors for financing of new, growing or struggling businesses. Venture capital investments generally are high risk investments but offer the potential for above average returns"
    Look up Venture capital in your textbook. Bet it is there!
    I am an Alumnus of Penn Foster and currently a Student in the Associate of Science Electrical Engineering Technology program. Into my last semester.
    In addition, we have a Penn Foster College group on yahoo. Search it out and come over and join!
    I hope this helps.
    Bill ASTET Penn Foster. ASEET Penn Foster (in progress fourth semester)
     
  3. Ryan1984

    Ryan1984 New Member

    Bill, thanks for the relpy.

    Yes, Venture capital is in the textbook. Unfortunetly, it does not say anything about it relating to serving on the board of directors. It is one possible choice, as I have nearly ruled out Private Placement and Trade Credit, but I can not rule out Stocks and Bonds yet until I solve the board of director issue.
     
  4. bill947

    bill947 New Member

    Ryan,
    Sometimes they place that kind of text into a question to see if you know the real meaning.
    That's as far as my ability goes in providing help. Without the textbook, I'm lost!
    I do believe there are some students on our Yahoo board that are into Accounting. Check it out.
    http://groups.yahoo.com/group/PennFostercollege/


    Bill
     
  5. KariS

    KariS New Member

    The question (as quoted by you) did not say that this was a public company with stock shares being traded. While the funds were obtained using "shares" this does not necessarily mean "stock", but could be interpreted to mean a part ownership expressed as % or as a given number of "shares". Also the question did not describe a specific sale, but rather as an "investing company". Becasue of all this I would read it to be B. Vulture Capital.
     
  6. Ted Heiks

    Ted Heiks Moderator and Distinguished Senior Member

    Ryan: You are correect to have eliminated Trade Credit and Private Placement. Bill and Kari are correct in telling you that the answer is Venture Capital. Here's why.

    Obviously, we can eliminate Trade Credit, as that is a method of financing purchases directly from one's suppliers.

    The Private Placement Memorandum involves placing stock privately with accredited investors (which are defined in terms of their levels of income and assets).

    In the case of Stocks and Bonds, the new stockholders would, of course, have the right to vote for the Board of Directors, but that would generally not happen until the next stockholders' meeting.

    Only in the case of the Venture Capitalist would there be new directors appointed immediately.

    Go with B.
     

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