Profit Reinvestment
Plowing back company profits into business rather than distributing to shareholders.
Formula
Retained Profit = Net Profit After Tax − Dividends Paid
Real World
Apple used decades of retained profits to fund its own chip development (the M-series), avoiding external borrowing and maintaining full strategic control over its supply chain.
Exam Focus
State that profit reinvestment has zero interest cost and preserves ownership — both points are required for full marks on 'advantages' questions.
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