Question

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?

Answer 1

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.

Answer 2

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.