Commercial Applications
A sole proprietor's business is experiencing rapid growth, but they are unable to meet financial demands. This reflects a limitation of the sole proprietorship structure.
- True
- False
Sole Proprietorship
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Answer
True
Reason — One of the major limitations of sole proprietorship is 'Limited Capital'. The capital resources are limited to the personal savings and borrowings of the proprietor. Their own assets may be insufficient and borrowing capacity is limited. Therefore, there is limited scope for growth and expansion of the business.
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Related Questions
The Sharma family runs a successful spice business that has been operating for generations. Customers trust their products because of the business's long-standing reputation. Which advantage of joint Hindu family business is illustrated in this case?
- Incentive to work hard
- Ancestral goodwill
- Ease of formation
- Quick decisions
Which form of business ownership is represented in the image?
- Joint Hindu Family Business
- Partnership
- Sole Proprietorship
- Public Limited Company
Statement I: The Joint Hindu family business refers to a business which is owned by members of a Joint Hindu family.
Statement II: The Joint Hindu family form of business is one in which the family possesses some inherited property.
- Only I is correct
- Both I and II are correct
- Only II is correct
- Both I and II are wrong
Meera runs a bakery. Due to a drop in demand for cakes, she starts focusing on cookies and bread. She quickly adapts her business to market trends without needing approvals. Which merit of sole proprietorship does this demonstrate?
- Unlimited liability
- Secrecy of operations
- Flexibility of operations
- Lack of continuity