What kind of problem do creditors lending funds to a sole proprietorship form of business face?
Uncertainty and lack of control are two major problems creditors experience. Each creditor faces a liquidity problem. Without special arrangements it will not be able to call in its loan or sell it to someone else if it wants to use the funds elsewhere or thinks the proprietor is misspending them. Besides a sole proprietorship business is inseparable from the proprietor. Death or retirement of a proprietor can cause its management to pass to people who are less competent or who have priorities or conflicts that lower its value.
You might also like to view...
An open market purchase by the Fed
A) increases the total amount of reserves in the banking system. B) causes the reserve requirement to fall. C) does not change the total amount of reserves in the banking system. D) decreases the total amount of reserves in the banking system.
Suppose a pharmaceutical company wants to test the effectiveness of a new drug in curing cancer. Which approach should it use to test whether the new drug is more effective than the existing medicines that are widely used?
What will be an ideal response?
A key difference between clubs and government is _____
a. government requires everyone within its jurisdiction to participate b. government acts on behalf of the poor c. government is not frivolous, like most clubs d. government requires collective action
Suppose OPEC oil cartel announces that it will increase production of oil. Using supply and demand analysis to predict the effect of increased production on equilibrium price and quantity, the first step is to show the:
A. demand curve shifting to the right. B. supply curve shifting to the right. C. demand curve shifting to the left. D. supply curve shifting to the left.