Which of the Following Statements Best Describes a Partnership

question 25

Multiple Choice

Which of the following statements best describes a partnership?

• A) Partnership involves two or more persons carrying on business with a view towards profits.
• B) Partnerships involve limited liability.
• C) Partnerships are created when two or more persons specifically agree to be in partnership.
• D) Partnerships are only created when they have been properly registered with the government.
• E) Partnerships are like any other form of contract; they can only be created when there is consensus between the parties in the form of offer and acceptance to that effect.

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Definitions:

Current Assets

Resources anticipated to be turned into cash, sold, or used up within a year or throughout the typical operating cycle of the company.

Net Sales

Total sales revenue minus returns, allowances, and discounts.

Gross Profit

Gross profit refers to the difference between revenue and the cost of goods sold before administrative, overhead, and other expenses.

Receivables Turnover Ratio

A financial metric that measures a company's effectiveness in extending credit and collecting debts, calculated by dividing net credit sales by the average accounts receivable.