Accounting 27/11/24

Which of the following best describes a sole trader's liability?

• Limited to their personal investment

• Limited to the business assets

• Unlimited liability for debts

• Only liable if the business fails

What is the primary disadvantage of a partnership?

• Difficult to establish

• Limited liability

• Shared responsibility for losses

• Inability to raise capital

Why might a business choose leasing over purchasing equipment?

• Leasing increases fixed assets

• Leasing reduces tax obligations

• Leasing avoids large upfront costs

• Leasing provides ownership rights

What is the primary benefit of trade credit for businesses?

• It is a long-term financing option

• It provides immediate cash

• It allows delayed payment to suppliers

• It reduces inventory costs

What is one advantage of forming a private limited company?

• Shares can be sold to the general public

• Financial records are private

• Liability is limited to the shareholders' investments

• It requires no formal registration

Which source of finance involves borrowing money with no requirement for collateral?

• Secured loan

• Unsecured loan

• Bank overdraft

• Issuing shares

In a public limited company (plc), what is the purpose of issuing shares?

• To repay loans

• To attract investors and raise capital

• To secure trade credit

• To expand partnerships

Which of these is a disadvantage of a bank overdraft?

• Interest is not charged

• It cannot be used by sole traders

• Interest rates are often higher than loans

• It must be repaid within a day

What type of business entity typically has the simplest form of ownership structure?

• Public limited company

• Partnership

• Sole trader

• Private limited company

A significant advantage of a partnership over a sole trader is:

• Limited liability

• Shared profits

• Access to more resources and expertise

• Easier formation