1.1 Capital: What are the two basic sources of funds for all businesses? Solution: The two basic sources of funds for all businesses are debt and equity. 1.2 Management role: What is working capital management? Solution: It is the management of current assets, such as inventory, and current liabilities, such as money owed to suppliers. 1.8 Organizational form: What are the three forms of business organization discussed in this chapter? Solution: The three forms of business organization we discussed are sole proprietorship, partnership, and corporation. 1.12 Organizational form: Explain what is meant by stockholders’ limited liability. Solution: Limited Liability for a stockholder means that the stockholder’s legal liability extends only to the capital contributed or the amount invested. 1.13 Organizational form: What is double taxation? Solution: The owners of a corporation are subject to double taxation—first at the corporate level and then again at a personal level when they are given dividends. 1.22
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