What are the advantages of using retained earnings as a source of finance to the company?

      

What are the advantages of using retained earnings as a source of finance to the company?

  

Answers


Lydia
The advantages of using retained earnings as a source of finance to the company.

1. It is the largest internal source of finance which the business will use without paying any costs.

2. The use increases the equity base of the company making it possible to generate more debt finance.

3. Retained earnings are used to finance new fixed assets whose value cannot be met by other sources

4. It is used without pre-conditions or restrictions making it the most flexible source of finance.

5. It boosts confidence among the company’s creditors

6. It is a permanent source of finance to the company to be used on long –term investments


lydiajane74 answered the question on May 9, 2018 at 19:28


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