Which growth approach involves increasing the size of the business by increasing sales and reinvesting profits?

Which growth approach involves increasing the size of the business by increasing sales and reinvesting profits?

• A. Inorganic growth
• B. Organic growth
• C. Economies of scale
• D. Private limited company

Answer: (B)

Growing from within the business by increasing sales and reinvesting profits is organic growth. This approach expands the company using its own resources—marketing, product development, better customer service, and capacity upgrades—funded by retained earnings rather than external funding. By boosting sales and then reinvesting the profits, the business scales gradually and sustainably. Inorganic growth would mean external moves like mergers or acquisitions, which is not described here. Economies of scale are cost advantages that come from producing more, not a method of growth in itself. A private limited company is simply a legal structure, not a growth approach. For example, a bakery that grows by selling more and using the profits to hire more staff and buy a larger oven is growing organically.

Growing from within the business by increasing sales and reinvesting profits is organic growth. This approach expands the company using its own resources—marketing, product development, better customer service, and capacity upgrades—funded by retained earnings rather than external funding. By boosting sales and then reinvesting the profits, the business scales gradually and sustainably.

Inorganic growth would mean external moves like mergers or acquisitions, which is not described here. Economies of scale are cost advantages that come from producing more, not a method of growth in itself. A private limited company is simply a legal structure, not a growth approach. For example, a bakery that grows by selling more and using the profits to hire more staff and buy a larger oven is growing organically.