Overview

plough-back


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The system of financing investment in firms by retaining profits. This is contrasted with financing investment by borrowing or issuing new equity capital. The advantage of plough-back is that it retains control, and reduces gearing if the firm has borrowed in the past. The disadvantage is that complete reliance on internal finance limits a firm's possible growth rate, and it cannot be applied in new firms.

Subjects: Economics.


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