UPSC Prelims 2014 GS Paper I · Q28 of 100 Economy easy

What does venture capital mean?

  1. (a) A short-term capital provided to industries
  2. (b) A long-term start-up capital provided to new entrepreneurs ✓ UPSC's answer
  3. (c) Funds provided to industries at times of incurring losses
  4. (d) Funds provided for replacement and renovation of industries

Why the answer is (b)

• Venture capital is long-term equity finance provided by investors to early-stage, high-potential start-ups in exchange for a share of ownership, accepting high risk for the chance of high returns — option (b).

• It is not short-term working capital (a), loss-time rescue funding (c) or funds for replacing old machinery (d).

• Hence option (b).

Why the other options are wrong

(a) A short-term capital provided to industries
Venture capital is long-term, not short-term.
(c) Funds provided to industries at times of incurring losses
It funds growth, not loss-making rescue.
(d) Funds provided for replacement and renovation of industries
It is not for replacement or renovation.

Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2014, held on 24 August 2014. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.

Reading the answer is not the same as getting it right under a clock. Practise this question with UPSC's negative marking, and anything you miss goes into an error notebook until you get it right twice.

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