Most Partnerships Have Difficulty Attracting Substantial Amounts of Capital

question 390

Multiple Choice

Most partnerships have difficulty attracting substantial amounts of capital. This is generally not a problem for a slow growing business. But if a business's products or services really catch on, the difficulty in attracting capital becomes a real drawback. For these reasons, many growth companies, which begin life as a proprietorship or partnership, at some point find it necessary to convert to a corporation. Eugene F. Brigham, Financial Management: Theory and Practice

• A) Argument; conclusion: This is generally not a problem ... business.
• B) Nonargument.
• C) Argument; conclusion: But if a business's products ... becomes a real drawback.
• D) Argument; conclusion: Many growth companies ... to convert to a corporation.
• E) Argument; conclusion: Most partnerships have difficulty ... amounts of capital.

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Definitions:

Shares Outstanding

Represents the total number of shares of a corporation that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares.

Owners' Equity

The residual interest in the assets of a company after deducting its liabilities.

Market Price

The current price at which an asset or service can be bought or sold in a marketplace, determined by supply and demand forces.

Common Stock

Equity ownership in a corporation, providing voting rights and a share in the company's profits through dividends.