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1 FINANCE MCQS

The type of liability where stockholders can lose only the amount they invested in the firm is called __________.

  • Counted liability
  • Invested liability
  • Unlimited liability
  • Limited liability
Correct Answer: D. Limited liability

Detailed Explanation

Limited liability is a legal principle where shareholders are only responsible for the company’s debts up to the amount they have invested. This means their personal assets are protected and cannot be used to settle company obligations. In contrast, under unlimited liability, owners may be required to cover debts with their personal wealth.

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