What are retained earnings?
Portion of a company’s owners’ equity thathas been earned from profitable operations but has not been distributed to shareholders as dividends.
Retained earnings are the portion of a company’s net income that is not distributed as dividends to its shareholders but is retained in the business. The amount of retained earnings is calculated by subtracting dividends declared from net income earned since the company’s inception. Retained earnings represent the cumulative earnings of the company’s operations that have not been paid out to shareholders as dividends.
Retained earnings are often used by companies to reinvest in the business for future growth opportunities or to pay down debt. Additionally, retained earnings can be used to fund research and development programs, make capital investments, or to finance mergers and acquisitions. Retained earnings can also serve as a financial cushion, helping companies weather economic downturns, or unexpected expenses.
Finally, retained earnings are an important metric for investors and analysts to assess a company’s financial health and long-term growth prospects. A company with robust retained earnings may indicate a profitable and stable business that is better positioned to weather economic downturns compared to a company with low or negative retained earnings.
More Answers:
The Importance of Acknowledging and Rewarding Employee Contributions in the WorkplaceUnderstanding the Disadvantages of Sole Proprietorship for Social Science Entrepreneurs
Advantages of Sole Proprietorship for Small Business: Easy Setup, Full Control, Profit Retention, Tax Benefits, Privacy, and Simple Dissolution