Charles Wants to Start a Décor Business and Takes a Loan

question 29

Multiple Choice

Charles wants to start a décor business and takes a loan of $35,000 from the bank to set up the business. Once the business is up and running, Charles will have full control of the business and its profits. However, he will also be responsible for any losses that the business incurs. In this scenario, which of the following forms of business ownership is Charles planning to start?

• A) A limited liability company
• B) A corporation
• C) A limited partnership
• D) A sole proprietorship

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Definitions:

Net Present Value (NPV)

A profitability measure for an investment that involves deducting the present value of cash expenditures from the present value of cash receipts throughout a certain timeframe.

Cash Flows

The total amount of money being transferred into and out of a business, affecting its liquidity.

Accrual Accounting

An accounting method that records revenues and expenses when they are incurred, regardless of when cash transactions occur.

Discounted Cash Flow Analysis

A financial model used to estimate the value of an investment based on its expected future cash flows, adjusted for the time value of money.