Question

Merits of Retained earnings.

Answer 1

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$\textsf{\pink{Q.}}$Merits of Retained earnings.

$\textsf{\pink{Ans.}}$Merits of Retained earnings are :-

i.) No Cost
ii.) No fixed Liability
iii.) No Interference
iv.) No security
v.) Goodwill

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Answer 2

(1) Retained earnings are, so to say, a free source of finance.

(2) These make funds available for implementing growth and expansion schemes of the company on a long-term or permanent basis.


(3) Retained earnings provide finances for facing unforeseen contingencies. These acts as shock absorbers, in times of financial crisis.

(4) Retention of earnings is desirable from the social viewpoint also; as these might prevent the unfortunate and untimely collapse of a good number of companies.