Which of the following statements is correct?
A) Retained earnings are usually available as a cash reserve
B) Retained earnings equal the total amount of equity in a company
C) Retained earnings are defined as operating profit plus proposed dividend
D) Retained earnings are not usually available as cash

Question

Quizplus · Accepted Answer

Retained earnings represent the portion of net income that a company keeps (retains) rather than distributing to its shareholders as dividends. These earnings are reinvested in the company, often in the business operations, such as buying new equipment or paying down debt, rather than being held as cash. Therefore, retained earnings are not typically available in the form of cash reserves.

Which of the Following Statements Is Correct