Which of the following means of funding a business is very reliable and cheap?

A. Bank loans
B. Loans from friends
C. Plough back profits
D. Debentures

Correct Answer:

Option C = Plough back profits

Explanation

Plough back profits also known as retained earnings are profits earned by a business, and reinvested in the business. What this means is that the business doesn’t spend its profits, but put it back in the business. It is considered one of the cheapest sources of business financing as it does not require interest to be paid.