Nazia and Shazia are partners in a firm providing counseling services. For improving the interiors of their office they required bank loan. Razia, Shazia friend requested a bank manager to grant loan to Nazia's firm, actively participate the negotiation process for the ideal. the bank extended credit to firm for the stipulated period. (a) State the liability of razia, (b) Identify the values promoted by partnership form of organisation.
Answers
Answer:
Ans. Sole proprietorship firm is a business unit where a person is solely responsible for providing the capital, for bearing the risk of the enterprise and for the management of business. Demerits of sole-proprietorship are.
(i) Unlimited liability: If due to some reasons there are losses in business, his personal property can be utilised to pay the business debts. This discourages him to expand his business.
(ii) Limited managerial capacity: It is difficult for a sole proprietor to excel in all areas of business like purchasing, marketing etc. Further due to limited resources he can’t hire professionally qualified staff.
(iii) Limited life of a business concern: Death, illness, insolvency of a sole-proprietor affects the business and can lead to its closure.