What kind of problem do creditors lending funds to a sole ...

[wenmo]

What kind of problem do creditors lending funds to a sole proprietorship form of business face?

Question 2

Subjective evaluations
 A) lend themselves to easy measurement.
  B) are objective in nature.
  C) are directly measured by productivity.
  D) are based on opinion.

[whitcassie]

Answer to Question 1

Uncertainty and lack of control are two major problems creditors experience. Each creditor faces a liquidity problem. Without special arrangements it will not be able to call in its loan or sell it to someone else if it wants to use the funds elsewhere or thinks the proprietor is misspending them. Besides a sole proprietorship business is inseparable from the proprietor. Death or retirement of a proprietor can cause its management to pass to people who are less competent or who have priorities or conflicts that lower its value.

Answer to Question 2

D

[wenmo]

Thanks for the timely response, appreciate it

[phuda]

Gracias!