2.1.3 Liability

Question 1

Define liability?

Answer 1

risk taking and financial responsibility

Question 2

What in unlimited liability?

Answer 2

if firm fails, owners are responsible for paying debts with any assets that they own

Question 3

What is a creditor?

Answer 3

person/firm to which money is owed to

Question 4

Define bankrucy?

Answer 4

official finding that person/firm cannot pay back their debts

Question 5

What is limited liability?

Answer 5

if firm fails, they will only lose the money that they have invested into the business

Question 6

2 ways in which firms try and avoid unlimited liability?

Answer 6

hide assets and how much they are actually worth

become a LTD to gain limited liability

Question 7

What funding is appropriate for sole traders and partnerships with unlimited liability?

Answer 7

Owners capital
Grants
Retained profit
Loans

Question 8

What funding is appropriate for Private/public companies with limited liability?

Answer 8

Owners capital 
Grants 
retained profit 
Share issues 
Loans