Question

Identify and explain the merits or limitations of sole proprietorship hidden in the
quoted lines :
(a) "The sole proprietor can easily change the size of the business."
(b) "All the profits of the business belong to the sole proprietor."
(c) "Inability of the owner to manage all the activities of business himself."​

Answer 1

Answer:

Merits of sole proprietorship

a) The sole proprietor can easily change the size of the business: ease of formation and closure..

The incorporation of sole proprietorship does not involve more procedures and formalities.

b) All the profits of the business belong to the sole proprietor: sense of accomplishment

All profits as well as loss/risk of the business belongs to the proprietor himself.

limitation of sole proprietorship

c) Inability of the owner to manage all the activities of business himself : Limited managerial ability / skill

A sole trader cannot be an expert in all the fields.

Thus the lack of knowledge and Managerial ability limits the growth of business.

Explanation:

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