Answer» - To purchase fixed assets: Every type of business needs some fixed assets like land and building, furniture, machinery, etc. A large amount of money is required for purchase of these assets.
- To meet day-to-day expenses: After establishment of a business, funds are needed to carry out day-to-day operations.
- To fund business growth: Growth of business may include expansion of existing line of business as well as adding new lines. To finance such growth, one needs more funds.
- To bridge the time gap between production and sales: The amount spent on production is realised only when sales are made. Normally, there is a time gap between production and sales and also between sales and realisation of cash. Hence during this interval, expenses continue to be incurred, for which funds are required.
- To meet contingencies: Funds are always required to meet the ups and downs of business and for some unforeseen problems.
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