The Net Income of a Sole Proprietorship Should Compensate the Owner

question 5

Multiple Choice

The net income of a sole proprietorship should compensate the owner for all of the following except:

• A)Personal service.
• B)The income taxes paid by the owner.
• C)Capital invested by the owner.
• D)The risk taken by the owner.

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Definitions:

Interest Rates

It denotes the cost, specified as a percentage of the principal, imposed on borrowers by lenders for the privilege of using their assets.

Coupon Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity.

Debentures

Long-term securities issued by a company that are not secured by physical assets or collateral but by the general credit of the issuer.

Specific Assets

Assets identified and designated for a particular purpose or project, often tied to securing a specific obligation.