Match each operational feature or capital concept of a sole proprietorship on the left with its corresponding commercial implication or description on the right.
- Ploughing back profitInternal source of capital created by reinvesting net earnings into business expansion.
- Unlimited liabilityThe proprietor's personal assets can be seized to satisfy business debts upon insolvency.
- Sole entitlement to profitDirect financial incentive driving maximum personal effort, dedication, and cost control.
- Lack of corporate entityThe business automatically ceases upon the death or incapacitation of the proprietor.
Answer
Ploughing back profit matches with internal source of capital created by reinvesting net earnings; Unlimited liability matches with personal assets being seized to satisfy business debts; Sole entitlement to profit matches with direct financial incentive driving personal effort; Lack of corporate entity matches with automatic business termination upon the death of the proprietor.
Each feature or financing method is correctly matched to its legal or economic consequence: reinvested profits provide internal capital, unlimited liability exposes personal assets to business debts, sole gain ownership maximizes incentive, and absence of legal personality leads to lack of business continuity upon the owner's death.
Step-by-Step Solution
Key Concept
Features, Capital Sources, Merits, and Demerits of Sole Proprietorship