Question

What is the primary goal of financial management for a sole proprietorship? maximize net income given the current resources of the firm decrease long-term debt to reduce the risk to the owner minimize the tax impact on the proprietor maximize the market value of the equity minimize the reliance on fixed costs?

Answer 1

A sole proprietorship has the single owner of the business and the main goal of the owner is to increase the value of his capital invested in the business which is also called as Equity.  

The objective of maximization include the maximization of net income given the current resources of the firm  

A proprietorship has only one owner so there is no need to decrease long-term debt to reduce the risk to the owner.  

The proprietor wants to earn more income and he will have to pay more taxes so the goal is not to minimize the tax impact on the proprietor.  

Similarly, the goal is also not to minimize the reliance on fixed costs.

Hence the correct answer is:

Maximize the market value of the equity