What are capital reserves and why are they important?
Capital reserves are funds set aside by a company to strengthen its financial position. They are crucial for stability.
How do capital reserves affect a company's financial health?
They provide a buffer against losses, enhance creditworthiness, and support future investments, ensuring long-term sustainability.
Can you give examples of how companies use capital reserves?
Sure! Companies use capital reserves for expansion, to cover unexpected expenses, or to pay dividends during tough times.
What happens if a company doesn't maintain adequate capital reserves?
Without adequate reserves, a company may face liquidity issues, struggle to meet obligations, and risk bankruptcy.
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