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

question 51

Multiple Choice

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

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

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Definitions:

Partnership

A business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Agreement.

Income Tax Return

A document filed with tax authorities detailing income earned, tax deductions taken, and taxes owed for the year.

Entity

Any organization, institution, or being that has a distinct existence, legally recognized as capable of rights and duties.

Profit

The financial gain achieved when the revenues earned from business activities exceed the expenses, costs, and taxes needed to sustain the activity.