Every organisation needs funds to carry on the activities uninterruptedly. For this purpose, they will depend upon own funds of capital, accumulated profits, reserves. Where there is not cost of finance, increase of goodwill etc.
Now it became more popular to borrow funds in the name of loans, debentures, bonds, creditors, advances etc. It is preferred to borrow than to raise capital since it is easy, requires less compliance and low monitoring. With borrowing, additional costs of interest and committed future repayment schedules will operate.
I feel there is definitely a positive strength with ZERO BORROWING.
- Self confidence
- Goodwill
- More profits available for distribution.
- Payment of high taxes which results into credibility before the tax collectors.
- No threat for recovery proceeding like, attachments, legal actions, stalling and seizure like activities
- Can carry on the activities without any influence.
Negative aspects are:
- More compliance cost to raise capital.
- More tax payments.
- More involvement of capital contributors.
- Low compliance may lead to Indiscipline by the management
- Inefficiency, wastage, low productivity
