Register now or log in to join your professional community.
Some shareholders create a business, using only their own capital. (No debt.) The business is successful, and produces a profit. The shareholders wish to expand the business (for example, by opening a second shop) but they have no capital to do so. The company therefore borrows capital to open the second shop which, because it replicates the first shop, is successful. The company's profits increase, benefiting the shareholders: they now have two successful shops rather than one.
There are risks and costs in this strategy.
