"As a source of finance, retained profit is better than other sources". Do you agree with this view/ Give reasons for your answers.
Yes, retained earnings are considered a preferable source of finance than the others. It is mainly because of the advantages that are associated with retained earnings as a long-term source of finance. Some of these benefits are
i. Increased price of equity shares- High retained earnings may lead to an increase in the price of equity shares.
ii. Reduced burden- It helps in reducing the burden of unexpected losses by acting act as a cushion at the time of crises.
iii. Permanent source of finance- These funds remain invested in the business for longer periods.