Which of the Following Is Considered a Disadvantage of a Limited

question 4

Multiple Choice

Which of the following is considered a disadvantage of a limited partnership?

• A) Difficulty in changing ownership
• B) Limited liability
• C) Growth potential
• D) Great access to capital

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Definitions:

Fixed Cost

Business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance premiums.

Financial Leverage

The use of borrowed funds with a fixed cost in an attempt to increase the returns to shareholders by magnifying investment gains or losses.

EBIT

Earnings Before Interest and Taxes, a financial metric that calculates a firm’s profit excluding interest and income tax expenses.

Variable Cost

A cost that varies directly with the level of production or volume of output, as opposed to fixed costs, which remain constant regardless of activity level.