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Advantages & Disadvantages of secret reserve |
| Answer» Advantages of Secret Reserves1. Helps in maintaining financial strength of the business.2. Helps in avoiding the entry of competing business units.3. Helps in maintaining the rate of dividend during the adverse business conditions.Disadvantages of Secret Reserves1. Leads to understatement of profit due to which shareholders get low rate of dividend2. Financial statement does not show true and fair view3. Sometimes misused by the management to cover their mistakes. | |