Which of the following means of funding a business is very reliable and cheap?
Answer Details
Plough back profits is a very reliable and cheap means of funding a business.
Plough back profits, also known as retained earnings, refers to the practice of reinvesting a portion of a company's profits back into the business instead of distributing them as dividends to shareholders. This approach allows a business to use its profits to finance its growth and expansion without incurring additional debt or giving up ownership.
Ploughing back profits is reliable because it does not involve any external financing or borrowing, which means the business does not have to worry about meeting repayment obligations or defaulting on loans. Additionally, since the profits are already earned, there is no cost associated with obtaining them.
Furthermore, it is a cheap means of funding because there are no interest payments or other fees associated with retaining earnings. Additionally, since the profits belong to the company, there are no equity dilution concerns or ceding control to external investors.
Overall, ploughing back profits is a very reliable and cost-effective means of funding a business, allowing it to finance its growth and expansion without incurring additional debt or giving up ownership.