Ecoomics Case

Net working capital (fond de roulement net): is the difference between the current assets and current liabilities that represent the capital available in the short term to run to run the business.

1. The 4 types of firms:

➢ Sole proprietorship: is a business owned and run by one person. Sole proprietorships are usually very small with few, if any, employees. Although they don’t account for much sales revenue (turnover) in the economy, they are the most common type of firm in the world.

Key characteristics:

• Easy to create (advantage)

• There is no separation between the firm and the owner. The firm can have only one owner.

• The owner has unlimited personal liability for any of the firm’s debt. If the firm defaults on any debt payment, the lender (prêteur) can require the owner to repay the loan from personal assets or to declare personal bankruptcy if he can’t pay the loan back. (Disadvantage)

• The life of a S.P is limited to the life of the owner. (Disadvantage).

➢ Partnership: is similar to a sole proprietorship, but with more than one owner. In this kind of firms, the reputation of the owners is the basis for the business.

Key characteristics:

• All partners are personally liable for all of the firm’s debts. A lender can require any partner to repay all of the firm’s outstanding debts.

• The partnership ends with the death or withdrawal (retrait) of any single partner.

A limited partnership is a partnership with 2 kinds of owners:

• General partners: they have the same rights and liability as partners in a regular partnership. Typically they run the