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Assess VisionSpring’s decision to finance its growth using retained profits - Edexcel - A-Level Business - Question 1 - 2019 - Paper 2
Question 1
Assess VisionSpring’s decision to finance its growth using retained profits. Retained profit is a source of internal finance kept by the business, rather than distr... show full transcript
Worked Solution & Example Answer:Assess VisionSpring’s decision to finance its growth using retained profits - Edexcel - A-Level Business - Question 1 - 2019 - Paper 2
Step 1
Arguments for retained profits
Answer
VisionSpring's decision to use retained profits is strategic as it allows for the reinvestment of £1 profit on each pair of glasses sold back into the business. This not only sustains operations but also enhances profitability without incurring debt, offering greater control over financial resources.
Step 2
Possible counterbalance
Answer
While retained profits are advantageous, there are limitations. An established business might secure larger immediate loans, offering potential for quicker expansion. Additionally, once retained profits are utilized, they won't be available for future finances, restricting flexibility.
Step 3
Potential judgement
Answer
Ultimately, VisionSpring's reliance on retained profits aligns with its model of affordability and empowerment. However, exploring loans, especially from supportive enterprises like ITC, could accelerate its growth, enabling faster provision of affordable glasses to those in need.