Assess VisionSpring’s decision to finance its growth using retained profits - Edexcel - A-Level Business - Question 1 - 2019 - Paper 2

VisionSpring's business model demonstrates significant profitability; for each pair of glasses sold, VisionSpring makes a £1 profit (100% mark-up). This profitability means that retained profits can directly contribute to funding future operations without the burden of interest payments on loans. Additionally, using retained profits gives VisionSpring greater flexibility and control over how the funds are applied, enabling more strategic investment in its mission.

While relying on retained profits has its advantages, there are potential downsides. An established business might be able to secure a loan that exceeds the available retained profits. Such loans can provide immediate capital for large expansions. Moreover, retained profits can become limited if funds are used for other purposes and may be less effective in supporting rapid growth.

VisionSpring's emphasis on retaining profits to fund growth aligns with its long-term objectives of providing affordable glasses to those in need. This strategy enables the company to maintain control and avoids the complications often associated with debt. However, depending solely on retained profits could slow down expansion when quick actions are needed to meet demand in underserved markets.