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3. Firms that are just beginning often have an idea or a prototype for a product or service to sell is at the early stage of financial capital. The sources of capital to them include:

a. Savings of the owner of the business

b. Venture capital

c. both a and b

 

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Raushan Raj
Raushan RajLv8
2 Nov 2020

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Related questions

Q21. A nation's raw materials and sources of energy are considered part of its capital resources.
a. true
b. false

Q22. Comparative advantage cannot be applied to activities of individuals.
a. true
b. false

Q23. Which of the following is true of scarcity?
a. it applies to raw materials; manufactured goods are not scarce
b. it affects all countries except the United States and Western Europe
c. it is a basic problem of economics that affects all nations
d. it is a basic problem of economics that affects all nations

Q24. The ability to produce a good or service at a lower opportunity cost than other producers face is known as comparative advantage.
a. true
b. false

Q25. Under the U.S. market system, land and capital goods are owned mainly by
a. the federal government
b. individuals and firms
c. local governments
d. state governments

Q26. A major disadvantage of a corporation is
a. its weakness at raising funds
b. its inability to limit the financial liability of the owners
c. the double taxation of its profits
d. its lack of continuity in the event of a stockholder's death

Q27. The major advantage of the sole proprietorship is its
a. ability to raise funds
b. lack of distinction between business and owner
c. provision of continuity in the business in case of death
d. flexible management

The three primary forms of business are sole proprietorships, partnerships, and corporations. You are contemplating starting a business. For each of the following proposals, explain which of the three types of businesses would be most appropriate. In each case describe the advantages and disadvantages of your choice.

(a) You are a music lover and are disgusted with the selection of compact discs available at the stores near your college. So, you decide to open up a store selling new and used compact discs.

(b) After a late-night cram session, you and your roommate need some pizza, but no restaurants are open. You decide to open an all-night pizza parlor.

(c) You have an idea that will make you a billionaire before you graduate from college: a pizza delivery service - from any restaurant to any dorm. To make your revenue goal a reality, a local venture capital firm has informed you that you will need to nationally franchise your operation.

The owner of a business is considering investing $55,000 in new equipment. She estimates that the net cash flow will be $5,000 during the first year and will increase by $2,500 per year each year thereafter. The equipment is estimated to have a 10 – year service life and a net salvage value at the end of this time of $6,000. The firm’s interest rate is 12% compounded annually.

(a) Determine the annual capital recovery cost (ownership cost) for the equipment.

(b) Determine the equivalent annual savings (revenue).

(c) Determine whether this investment is wise.

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