Accounting Multiple Choice Question – 4 February 2025

Alex, a financial consultant has made the following statements about venture capital.

•Statement 1 – Venture capitalists may realise their investment by selling their shares following flotation on the stock exchange

•Statement 2 – Venture capitalists never sit on the board of a company

•Statement 3 – Venture capitalists normally expect a company’s existing owners to bear a substantial part of the risk

Which of the statements are true?

Select ONE answer:

1. Statements 1 and 2 only
2. Statements 2 and 3 only
3. Statements 1 and 3 only
4. Statements 1, 2 and 3

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct == > Venture capitalists often will want a place on the board to secure their investment, so (statement 2) is false. They are very likely however to realise their investment by selling their shares following flotation on the stock exchange (statement 1), and they would normally expect a company’s existing owners to bear a substantial part of the risk (statement 3).
4. Not correct

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