Give The Purposes Of Business Combination?

Purposes of combinations:-
The primary objectives of business combinations are as under:
Use of idle working capital:
The total working capital of business units working separately normally exceeds its requirements. There is, therefore, a waste of scarce resources of the country in the form of an idle capital. If the business units combine, the idle capital can be put to the best use.

Saving in capital expenditure:
The growth of business combination reduces wasteful competition, replaces outdated and obsolete machinery and reduces capital expenditure.
Large scale operation:
A combination is able to produce goods on large scale.
Economy is overhead cost:
The combination of business units reduces unnecessary administration expenses, retains efficient persons and pays them handsomely.
Reduction in selling expenses:
The formation of combinations curtails total expenditure of salesmen, advertisements for the sale of products.

Stability in prices:
The business combination eliminates competition and provides stability in prices.
Greater facility for raising capital:
The large combination has greater credit worthiness and is in better position to rise the to its business requirements.
Utilization of patents and technical knowledge:
A combine makes possible the utilization of patents and technical know how on a cooperative basis.
Ready market for shares and debentures:
A large combine provides a ready market for shares and debentures.

Add Comment

Report