Lisa Is Considering Investing $60,000 in a Limited Partnership That

question 48

Essay

Lisa is considering investing $60,000 in a limited partnership that is raising additional capital. According to the prospectus, for the past 10-year period, the average earnings have been 12% and for the past 5-year period, the average earnings have been 9%. Lisa is in the 24% tax bracket.

a. List some factors Lisa should consider in making a decision on the potential investment.
b. Assuming the partnership finances its activities with equity rather than debt, what is the
maximum cash flow benefit Lisa can receive if the partnership generates losses?

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Definitions:

Job-Order Costing

An accounting method that assigns costs to specific batches or job orders, making it possible to track the financial inputs and outputs of individual jobs.

Manufacturing Overhead

The indirect costs associated with manufacturing that are not directly tied to the production of goods, such as utilities, rent, and maintenance of equipment.

Cost of Goods Sold

An accounting term referring to the direct costs attributable to the production of the goods sold by a company, including materials and labor.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.