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Retained earnings be the portion of net income that is unploughed rather than distributed as dividends to sh arholders. Companies do non hold to come on alternative sources of finance by reinvesting the carry earnings so it is a major source of finance. Retained earnings argon an immediate fund avail up to(p) and the friendship does not need the permission of other parties to implement it. However a fraternity 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 bidding: Companies should dash steps to ensure that customers keep their course credit particularize and legal injury of trade. In magnitude to encourage wide awake 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 debtors, it is affirmable for companies to reduce their assets. When debtors return faster, the liquidity of the keep company will append as on that point will be more(prenominal) than specie to use.

Rather than development external sources of finance such as bank overdraft, debt cypher or invoice discounting, the company offer 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 probability cost as property are being even up and ca nnot be used for more useful 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: BestEssayCheap.com

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