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State the merits and demerits of public deposits and retained earnings as methods of business finance.

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Merits of public Deposits: 

1. These deposits take care of short-term and medium-term financial requirements. 

2. These deposits do not involve the creation of any charge on any asset of the borrower.

Demerits of public Deposits:

1. Collection of deposits form a large number of depositors is somewhat difficult. 

2. New companies generally find it difficult to borrow funds through public deposits.

Merits of retained earnings:

1. Retained profits reduce the dependence of company on external borrowings. 

2. The Society stand to benefit from the stability accorded to industrial sector by retained earnings.

Demerits of retained earnings:

1. Ploughing-back of profits is possible only when there is stability in earnings. 

2. Retained earings may lead to over-capitalisation, which is not good for a concern.

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