If the company opts ( choose) not to expand, what is the implication for the company's future borrowing needs? What are the implications if company does expand?
Wouldn't this greatly depend on future income and profit forecasts with and without expansion? The future borrowing needs depends on capital and income forecasts, it seems to me. Expansion or contraction is just an input in to the capital and income forecasts.
Its borrowing needs will be less if it choses not to expand, and more if it does. How much it needs may need to borrow depends upon other factors as well. Most companies seem to require a line of credit these days, even though they are not expanding, and the unavailability of it is hurting the economy.
If a company chooses not to expand, it generally implies that the company will not require significant additional funds in the future for investments and growth. This means that the company's future borrowing needs will likely be lower. Without expansion plans, the company may not need to borrow money to fund new projects, open new branches, hire more employees, or invest in new technologies or assets.
On the other hand, if a company opts to expand, it suggests that the company has growth plans and intends to invest in various areas such as new products, markets, or infrastructure. In this case, the company's future borrowing needs could be higher. Expansion usually requires additional capital to finance the costs associated with growth, such as purchasing new equipment, hiring more staff, conducting research and development, or acquiring other businesses.
The implications of expansion or lack thereof on the company's borrowing needs depend on the specific circumstances and the company's strategic decisions. It's important to note that each company's situation is unique, and factors such as industry conditions, competition, financial performance, and management's goals can all influence the borrowing needs and decisions of a company.