What are retained earnings?
Retained earnings are the portion of net profit that a business keeps rather than distributing as dividends to shareholders.
Why are retained earnings important?
They provide internal funding for growth, investment, and debt repayment without needing external financing.
How are retained earnings calculated?
They are calculated by adding net profit to existing retained earnings and subtracting any dividends paid.
Where are retained earnings reported?
They appear in the equity section of the balance sheet.
How do retained earnings change over time?
They increase with profits and decrease with losses or dividend payments.