Chris and Paul operate a business in which both have contributed $50,000 to the business's capitalization. Chris makes all busin
ess decisions and Paul made Chris sign a partnership agreement saying that Paul is only liable for partnership debts up to $50,000. a. both are general partners
b.Chris is a general partner and Paul is a limited partner
c. Paul is a general partner and Chris is a limited partner
d. both are limited partners
Both Chris and Paul are general partners. It is true that Chris makes all business decision and that made Paul irrelevant to the management of the partnership. And he made Chris signed a partnership agreement that he will be liable up to the extent of his capital contribution. Yet that is not a solid evidence towards third party liability in case of solvency. In order for him (Paul) to become a limited partner, he should be registered to the state as “limited partner” during the partnership’s registration and that will be recorded into the Articles of Partnership. Otherwise, he is classified as general partner and is liable up to the extent of his personal asset. The contract (partnership agreement) that he and Chris had is valid only up to them but not into third party.
The impact of financial leverage varies across all income levels.
The use of debt to acquire extra assets or fund initiatives is known as financial leverage. Individuals or corporations borrow money to incur debt. Borrowers guarantee lenders that they will repay the principle and interest on their loans. Financial leverage is also known as leverage or equity trading.
Fundamental analysis use the degree of financial leverage (DFL) to measure the sensitivity of a company's earnings per share (EPS) to changes in profits before interest and taxes (EBIT). Whenever a corporation has a high DFL, it typically has large interest payments, which reduces EPS.