Which One of the Following Best Describes the Primary Advantage

question 60

Multiple Choice

Which one of the following best describes the primary advantage of being a limited partner rather than a general partner?

• A)entitlement to a larger portion of the partnership's income
• B)ability to manage the day-to-day affairs of the business
• C)no potential financial loss
• D)greater management responsibility
• E)liability for firm debts limited to the capital invested

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Definitions:

Cost of Capital

The rate of return that a business must earn on its investment projects to increase or maintain its value, encompassing the cost of debt and equity.

Real Option

The flexibility to make decisions on investments, such as the timing of projects or the expansion of operations, based on the evolution of market conditions.

Expansion Option

The opportunity or ability to invest additional capital in a project, based on its successful performance or other factors.

NPV

Net present value, a calculation that reflects the present value of future cash flows minus initial investments, used to assess the profitability of a project.