Advertisements
Advertisements
Question
Answer the question.
Discuss three advantages of plowing hack of profit, from the company’s point of view.
Advertisements
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
Select the correct answer from the options given below and rewrite the statement.
Retained earnings are ______ source of financing.
Write a word or a term or a phrase that can substitute the following statement.
The policy of using undistributed profit for the business.
Find the odd one.
Explain the following term/concept.
Ploughing back of profit
Study the following case/situation and express your opinion.
The Balance-sheet of a Donald Company for the year 2018-19 reveals equity share capital of Rs. 25,00,000 and retained earnings of Rs. 50,00,000.
- Is the company financially sound?
- Can the retained earnings be converted into capital?
- What type of source retained earning is?
What is retained earnings? Explain Determinants of retained earnings.
Explain any four disadvantages of Retained Earnings.
What are retained profits called “self-financing”?
Discuss the advantages of retained profits as a source of finance.
Discuss the disadvantages of retained profits as a source of finance.
