Question

Which one of the following statements correctly applies to a sole proprietorship?-The business entity has an unlimited life.-The ownership can easily be transferred to another individual.-The owner enjoys limited liability for the firm's debts.-Debt financing is easy to arrange in the firm's name.-Obtaining additional equity is dependent on the owner's personal finances.

Answer 1

Answer:

The correct answer is the option E: Obtaining additional equity is dependent on the owner's personal finances.

Explanation:

To begin with, a sole propietorship is the name given to a type of company whose main characteristic is that the ownership belongs to a single person and that there is no distinction between that person and the company, therefore that the owner obtains all the profits but also has unlimited responsibility for all losses and debts.

Secondly, it is understandable that for this type of company it is difficult to obtain financing and that can only be done by two ways: debts or equity. Moreover, in order to do that, the owner's personal finances have to go well according to the fact that the owner is equal to the entity and therefore there is no distinction from the finances of both.