Advertisements
Advertisements
Question
Answer the question.
Discuss three advantages of plowing hack of profit, from the company’s point of view.
Solution
Ploughing back of profits refers to the process of retaining a part of the net profit year after year and reinvesting the same in business.
There are some advantages of ploughing back of profits are :
(i) The company can undertake its plans for expansion, growth and modernization without bothering about conditions in the capital market.
(ii) Ploughing back of profits add to the financial strength and creditworthiness of the company.
(iii) Reserves created by ploughing back of profits can be used to stabilize the rate of dividend on equity shares.
APPEARS IN
RELATED QUESTIONS
What has retained earnings? Explain any two of its merits and two of its demerits.
Select the correct answer from the options given below and rewrite the statement.
Retained earnings are ______ source of financing.
Find the odd one.
Answer in one sentence.
What are retained earnings?
Correct the underlined word and rewrite the following sentence.
Retained earnings is an external source of finance.
Justify the following statement.
Retained earning is simple and cheapest method of raising finance.
What is retained earnings? Explain Determinants of retained earnings.
What are retained earnings?
What are retained profits?
Discuss the advantages of retained profits as a source of finance.
