Question

1) One of the financial goals of a sole proprietorship? A) Minimize the market value of the equity B) Maximize the reliance on fixed costs C) Minimize net income given the current resources of the firm D) Maximize the tax impact on the proprietor E) Minimize long-term debt to optimal levels to reduce the risk to the owner

2) The Sarbanes-Oxley Act, which was enacted in 2002, has: A) increased the number of U.S. firms going public on foreign exchanges. B) increased senior management's involvement in the corporate annual report. C) increased the annual compliance costs of all publicly traded firms in the U.S. D) all of the above. E) none of the above.

Answer 1

1. The owner of sole proprietor have got unlimited liabilities so he is always exposed to the the cost of distress so one of the major focus of sole proprietorship is to minimise the long-term debt to optimal level to reduce the risk of the owner.

All statement except option ( E) are false. Sole proprietorship is not for minimising the market value or maximizing the Reliance on fixed asset or minimising net income aur maximizing tax impact because all these things will lead to negative impact on owner.

Correct answer is option (E)Minimize long-term debt to optimal levels to reduce the risk to the owner.