When Entering into a New Partnership, a Good Strategy Is

question 308

Multiple Choice

When entering into a new partnership, a good strategy is to

• A) avoid putting the agreement in writing since this would limit the flexibility of the partnership.
• B) put the partnership agreement in writing.
• C) plan to incorporate as soon as possible.
• D) agree to put the first year's profits back into the partnership.

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Definitions:

Compounded Annually

Describes the process by which an investment's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.

Interest Rate

Interest rate is the percentage of principal charged by the lender for the use of its money or the return earned on deposited funds.

Future Value

The value of an investment at a specified date in the future that is equivalent in value to a specified sum today, after being compounded at a given interest rate.

Simple Interest

Interest calculated on the principal amount of a loan or deposit, without compounding.