Chapter 1 quiz - Chapter 1 Quiz Kelly and Nicole open up a...

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Chapter 1 Quiz Kelly and Nicole open up a day care together. Their business is formed as a general partnership, so that they both invest $15,000 (i.e. a total of $30,000) and share equally in the profits or losses. They also obtain a $20,000 business loan from the bank. Unfortunately, the day care business does not succeed. The first year, it incurs a loss of $50,000 and folds, at which point Nicole decides to flee the country, leaving behind no personal assets of any kind. The bank can hold Kelly liable for up to. .. the entire amount of the loan -- i.e. $20,000. When we say that shareholder wealth maximization should be the primary goal of a corporation, we are assuming that… management is not purposely concealing important information from investors. Which of the following could explain why a business might choose to operate as a corporation rather than a sole proprietorship or partnership? Corporations generally find it easier to raise capital.
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This note was uploaded on 07/25/2011 for the course FINC 3334 taught by Professor Whitworth during the Winter '10 term at University of Houston.

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