POA notes chapter 1

Question 1

What are the features of a Sole Proprietorship in terms of Capital structure?

Answer 1

Ownership and access to funds.

Question 2

Elaborate on Ownership. (Feature of SP in terms of Capital structure)

Answer 2

A Sole Proprietorship (SP) is owned by one person who contributes capital to set up the SP.

Question 3

ELaborate on Access to Funds.(Feature of SP in terms of Capital structure)

Answer 3

It is less likely for banks and other leaders to lend money to the SP due to the lac of personal assets that can serve as collaterals. Hence, access to funds is usually limited to the personal funds of the owner.