By subtracting dividends paid to shareholders from the net income, accountants are able to calculate the:
A) increase in net income.
B) decrease in profit margins.
C) change in pretax income.
D) change in retained earnings.

Question

By subtracting dividends paid to shareholders from the net income, accountants are able to calculate the:
A) increase in net income.
B) decrease in profit margins.
C) change in pre­tax income.
D) change in retained earnings.

Quizplus · Accepted Answer

Subtracting dividends paid to shareholders from net income calculates the change in retained earnings. Retained earnings are the portion of net income that a company chooses to keep and reinvest into the business rather than paying out as dividends.

By Subtracting Dividends Paid to Shareholders from the Net Income