Retained earnings on the balance sheet represents

Question

Quizplus · Accepted Answer

Retained earnings represent the cumulative amount of profits reinvested in the firm, meaning it includes all past earnings that have not been paid out as dividends to shareholders. Therefore, option B is the correct answer. Option A refers to net income, which is a separate line item on the income statement. Option C refers to cash, which is a separate line item on the balance sheet. Option D subtracts preferred dividends from net income, which only gives us the amount of earnings available to common shareholders, not the total amount of retained earnings.

Retained Earnings on the Balance Sheet Represents