At the end of the year, Phil's Pool and Spa has money in a retained earnings account. The amount in this account represents
A) profits that must be paid to shareholders.
B) the money saved by withholding corporate bonuses.
C) funds paid to the firm by the government.
D) the part of the company's profit that is taxable.
E) profits the company kept and reinvested in the firm's assets.

Question

Quizplus · Accepted Answer

Retained earnings are earnings after expenses and taxes that are reinvested in the assets of the firm and belong to the owners in the form of equity. Retained earnings are an important source of funds and are, in fact, the only long-term funds that the company can generate internally.

At the End of the Year, Phil's Pool and Spa