Question : Case Study: ABC Corporation - Financing Growth Strategies
ABC Corporation, a leading manufacturing company, is looking to finance its growth strategies. The company is exploring various sources of business finance to achieve its expansion goals.
Questions : Different Sources of Finance
How can ABC Corporation use retained earnings as a source of finance for its expansion?
Option 1: By issuing new shares to existing shareholders
Option 2: By borrowing from financial institutions
Option 3: By utilizing profits accumulated over the years
Option 4: By liquidating assets
Correct Answer: By utilizing profits accumulated over the years
Solution : The correct answer is (c) By utilizing profits accumulated over the years
Retained earnings are the accumulated profits that a company has retained and not distributed to shareholders as dividends. ABC Corporation can use these retained earnings to finance its expansion initiatives, such as investing in new projects, acquiring assets, expanding operations, or entering new markets. This form of financing doesn't involve issuing new shares, borrowing from financial institutions, or liquidating assets; instead, it relies on utilizing the company's internally generated profits.
