An advantage of a proprietorship is that a. it is difficult and expensive to set

Question

An advantage of a proprietorship is that a. it is difficult and expensive to set up b. the owner has complete control over the business c. the business can issue stocks and bonds d. the owner has unlimited liability 1. 2. Equity financing alternatives include a. issuing bonds b. issuing stocks c. borrowing from a bank d. all of the above 3. Economists normally assume that the goal of a firm is to (i)make profit as large as possible even if it means reducing output (ii) (iii) make profit as large as possible even if it means incurring a higher total cost. make revenue as large as possible a. (i) and (ii) b. (i) and (iii) c. (ii) and (iii) d. None of the above are correct.

Explanation / Answer

Ans: 1 – B – The owner has complete control over the business.

Sole proprietorship is most common form of business amongst small business owner and owner has whole decision making and control in his hand. Owner is sole responsible for profit and loss and it has full power and authority to make any decision in business. Owner is personally liable for profit and debt created by business.

Ans: 2 – B - Issuing stocks

Equity financing alternative normally refers to raising capital for business through sale of equity shares for a business. It refers to ownership sale to in market for sole purpose of business expansion. Initial Public Offer (IPO) is form of equity financing for a company.

Ans: 3 - B – i and iii

The main objective of the firm is to maximize profits in market by selling its output and to gain its revenue further. The first and main goal of the company is to expand its revenue as much as possible by pushing sale of product or service in economy.

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