Accounting 4/12/24

A partnership agreement typically outlines:

• The liability of shareholders

• The distribution of profits among partners

• Public disclosure requirements

• The maximum number of partners allowed

Which of the following best describes a sole trader?

• A business owned and managed by one person

• A business with unlimited liability for shareholders

• A business with the ability to issue shares

• A business that must disclose its finances to the public

Which is a disadvantage of forming a public limited company?

• Limited liability

• High cost of setting up and operating

• Easy access to large capital

• Ability to trade shares publicly

What is the primary advantage of a bank overdraft as a source of finance?

• It is secured by collateral

• It provides a fixed long-term loan

• It offers flexibility for short-term cash needs

• It requires no repayment

A secured loan is different from an unsecured loan because:

• It does not require interest payments

• It requires collateral

• It is only available to sole traders

• It must be repaid within a month

Which of the following is NOT a feature of a partnership?

• Unlimited liability for most partnerships

• Sharing of profits among partners

• The ability to issue shares

• Joint decision-making

Which type of business entity has the most difficulty raising capital?

• Sole trader

• Partnership

• Private limited company

• Public limited company

Which source of finance is typically used to purchase assets without full ownership?

• Trade credit

• Leasing

• Secured loans

• Bank overdrafts

A sole trader can finance their business primarily through:

• Issuing bonds

• Personal savings

• Public share offerings

• Corporate tax savings

What is the primary disadvantage of using trade credit?

• It requires immediate repayment

• It typically carries higher interest rates

• Suppliers may limit the credit period

• It reduces the owner's control