ENTREPRENEURIAL FINANCE
SOURCES OF FUNDING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The business will not be required to pay dividends to its shareholders
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The business will pay less tax on its profits
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The amount will not need to be paid back
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The amount available will always match fully the company’srequirements
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Detailed explanation-1: -Retained profit is the amount of a business’s net income that is kept within its accounts, rather than paid out to shareholders. Retained profit is a strong indicator of the long-term financial stability of a business.
Detailed explanation-2: -Because funds are generated internally, there is more operational freedom and flexibility. It improves the company’s ability to absorb unexpected losses. It may increase the market price of a company’s equity shares.
Detailed explanation-3: -Invest in expansion. A company that’s focused on growth may pay low or no dividends, because it makes more sense to finance expansion activities. Create a safety net. Boost investor confidence. Inefficiency. Shareholder dissatisfaction. 18-Jan-2022