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LOS i: Compare and contrast venture capital funds to buyout funds. fficeffice" />

Q1. With respect to venture capital (VC) funds and buyout funds, measuring returns accurately is:

A)   equally difficult with VC funds as it is with buyout funds.

B)   more difficult with VC funds than with buyout funds.

C)   less difficult with VC funds than with buyout funds.

Correct answer is B)

The difference is a natural consequence of the buyout funds purchasing entities in later stages of development.

 

Q2. In contrast to venture capital funds, buyout funds usually have:

A)   more frequent losses and more upside potential.

B)   less frequent losses and less upside potential.

C)   less frequent losses and more upside potential.

Correct answer is B)

These differences are the natural consequence of the buyout funds purchasing entities in later stages of development or even established companies where the risks are lower.

 

Q3. In contrast to venture capital funds, buyout funds usually have a:

A)   lower level of leverage and earlier and steadier cash flows.

B)   higher level of leverage and earlier and steadier cash flows.

C)   higher level of leverage and later and more erratic cash flows.

Correct answer is B)

Buyout funds are usually investing in later-stage companies where the risks are lower. The cash flows are steadier and the investors can use more leverage.