BA 131 Study Guide - Quiz Guide: Limited Liability Partnership, Sole Proprietorship, Savings Account
Document Summary
The sole proprietor has unlimited liability for matters relating to the business. The sole proprietor is therefore responsible for all the obligations of the business, even if those obligations exceed the amount the proprietor has invested in the business. Each partner in a partnership is usually liable for the activities of the partnership as a whole. However, in a limited liability partnership at least one of the partners has limited liability. A corporation is a legal entity that is liable for its own activities. Stockholders, the corporation"s owners, have limited liability for the corporation"s activities. Corporate (or owners") objectives (e. g. maximise shareholder wealth) are not closely aligned to managers objectives (e. g. maximise salary, empire building). You can use a numerical illustration to explain. Objective of maximising profit available to shareholders or objective of maximising profit available to shareholders per ordinary share. The three overall factors that affect the value of a firm"s stock price are cash flow, timing, and risk.
