When Evaluating the Liquidity of a Proprietorship,creditors Will Likely Base

question 10

Multiple Choice

When evaluating the liquidity of a proprietorship,creditors will likely base their decision on:

• A)The business ability to generate a profit.
• B)Previous debts of the business.
• C)The financial strength of the owner.
• D)The total assets owned by the business.

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Definitions:

Owner Investment

Capital put into a business by the owner(s) separate from earnings or loans, typically to start or grow the business.

Owner's Capital

Owner's Capital represents the total equity or net worth contributed by the owners or shareholders of a company, plus retained earnings.

Net Income

Net income is the total profit of a company after all expenses, taxes, and costs have been deducted from total revenue, indicating the company's financial performance over a specified period.

Liabilities

Financial obligations that a company owes to outside parties, which can include loans, accounts payable, and mortgages.