Why are saving and reinvestment useful for an entrepreneur?
Answer and explanation
Correct answer: To support future growth and difficult times
Saving creates a financial reserve that can help meet unexpected expenses or weak sales periods. Reinvestment means putting part of the earnings back into the enterprise for equipment, stock, technology, marketing, or expansion. Therefore option A is correct. Spending everything immediately removes flexibility, while closing the business or removing customers is unrelated to these practices.
Frequently asked questions
What is the correct answer to this question?
To support future growth and difficult times
Why is this the correct answer?
Saving creates a financial reserve that can help meet unexpected expenses or weak sales periods. Reinvestment means putting part of the earnings back into the enterprise for equipment, stock, technology, marketing, or expansion. Therefore option A is correct. Spending everything immediately removes flexibility, while closing the business or removing customers is unrelated to these practices.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Sources of Business Finance. Topic: Owner’s Funds.
