Its retained earnings is the actual cash that the firm has generated through operations less the cash that has been paid out to stockholders as dividends.If the firm has sufficient retained earnings,it can purchase assets and pay for them with cash from retained earnings.

Question

​Its retained earnings is the actual cash that the firm has generated through operations less the cash that has been paid out to stockholders as dividends.If the firm has sufficient retained earnings,it can purchase assets and pay for them with cash from retained earnings.

Quizplus · Accepted Answer

Retained earnings represent the portion of net income that a company keeps (retains) rather than distributing it to shareholders as dividends. However, retained earnings are not necessarily the same as cash available. They can be reinvested in the company for growth, paying off debt, or other purposes, but this figure does not directly indicate the actual cash on hand.

​Its Retained Earnings Is the Actual Cash That the Firm

Its Retained Earnings Is the Actual Cash That the Firm