Question

With reference to business finance, explain the following: Retained earnings

Answer 1

Retained earnings are the profits that a company has earned to date, less any dividends or other distributions paid to investors. This amount is adjusted whenever there is an entry to the accounting records that impacts a revenue or expense account. A large retained earnings balance implies a financially healthy organization. The formula for ending retained earnings is :
Beginning retained earnings + Profits/losses – Dividends = Ending retained earnings.