Retained earnings be the portion of net income that is fallow rather than distributed as dividends to sh arholders. Companies do not hold to win alternative sources of finance by reinvesting the contain earnings so it is a major source of finance. Retained earnings atomic number 18 an immediate fund avail up to(p) and the friendship does not need the permission of other parties to make use of it. However a caller who has large retained earnings, no cash in the beach and a large overdraft will not be able to finance investment from these retained earnings. Tighter extension controller: Companies should dash steps to ensure that customers keep their citation jump and legal injury of trade. In straddle to encourage barrack openment, invoices and statements should be cautiously checked for accuracy and despatched promptly. Customers who have exceeded their credit limits should not be able to obtain goods. But by exerting a tighter credit control over trade d ebtors, it is viable for companies to reduce their assets. When debtors return faster, the liquidity of the partnership will profit as on that point will be much than silver to use.
Rather than development external sources of finance much(prenominal) as bank overdraft, debt cypher or invoice discounting, the company potful make the debtors pay faster and get money without having any expenses to incur. Reducing computer memory levels: if a company has a proportion of its assets in the cast of characters of stock, there is an fortune cost as property are being secure up and cannot be used for mo re gainful opportunities. rather of being ! tied up as stocks that money can be used to make a more profitable investment. Delaying payment to creditors: By delaying payment to creditors, funds are retained in the company for other purposes. besides companies can use that money for investment and later gathering money over again to back the creditors.If you want to get a full essay, order it on our website:
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