Final answer:
Businesses can grow revenues and profits by reinvesting earnings into improvements and borrowing financial capital through banks and bonds. Reinvestment in equipment, structures, and R&D is crucial for established companies, while borrowing may be necessary during periods with low profits or losses to maintain investments and survive challenging economic times.
Step-by-step explanation:
Two major avenues for growing revenues and profits in a business are reinvesting profits and borrowing financial capital. A business reinvests by allocating a portion of its profits towards improvements, such as upgrading factories, hiring additional labor, or acquiring new technology.
This can enhance productivity and generate more sales, contributing to increased cash flow and profit. Furthermore, profits are fundamental as they can be reinvested in equipment, structures, and research and development, forming a significant source of financial capital for many established companies.
When profits are not enough, firms may need to find financial capital from other sources. Notably, they can turn to borrowing through banks and issuing bonds. This is especially necessary for maintaining investments during challenging periods of low profits or losses. Successful borrowing is often predicated on having a history of significant revenues or profits to make credible promises to repay lenders with interest.
Ultimately, each business aims to earn a profit, calculated by subtracting total costs from total revenue. Growth in workforce and investments are essential ingredients in ensuring profitability and the success of these financial strategies.