A Significant Disadvantage of Owning a Sole Proprietorship Is the

question 288

Multiple Choice

A significant disadvantage of owning a sole proprietorship is the

• A) possibility of limited liability.
• B) heavy tax liability that must be assumed.
• C) overwhelming time commitment often required of the owner.
• D) lack of incentives to motivate the owner.

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Definitions:

Retained Earnings Restrictions

Limitations or constraints placed on the portion of earnings that are not distributed as dividends but kept within the company for reinvestment or other purposes.

Prior Period Adjustment

Adjustments made to the accounts to rectify errors or omissions in the financial statements of previous periods.

Deficit

A situation where expenditures exceed revenue, leading to a shortfall that must be financed through borrowing or using savings.

Earnings Per Share

A financial ratio that measures the portion of a company's profit allocated to each outstanding share of common stock, indicating the company’s profitability.