- CFA Exams
- CFA Level I Exam
- Topic 8. Alternative Investments
- Learning Module 3. Investments in Private Capital: Equity and Debt
- Subject 1. Private Equity Investment Characteristics
CFA Practice Question
Which best describes venture capital?
B. Venture capital is in the form of equity.
C. Venture capital is short-term financing, usually at higher-than-market rates.
D. Venture capital is financing for privately held companies, typically in the form of equity and/or long-term debt.
A. Venture capital is typically a secondary form of financing, after bank financing.
B. Venture capital is in the form of equity.
C. Venture capital is short-term financing, usually at higher-than-market rates.
D. Venture capital is financing for privately held companies, typically in the form of equity and/or long-term debt.
Correct Answer: D
Venture capital becomes available when financing from banks and public debt or equity markets is either unavailable or inappropriate.
User Contributed Comments 3
| User | Comment |
|---|---|
| ankurwa10 | this is actually a good question. Helps clarify the point that VC investment isn't always in equity. traditionally, if i need to fund my start up, i go to banks or angel investors (debt or equity). VCs can simply be seen as a proxy (replacement for them, hence debt and equity) |
| Inaganti6 | it's also a good question because it proves that choosing the more broad and unconditionally right answer can be rewarding. D> B |
| ascruggs92 | B is wrong because it is absolute, not because it is "less right" than D. Venture Capital CAN BE in the form of equity or IS OFTEN in the form of equity would be correct. |