All of the following are true of retained earnings except:
A)it is the difference between paid in capital and the total dividends paid.
B)it represents the amount of new capital shareholders indirectly contribute.
C)it is equal to one minus the payout ratio.
D)it is the amount of earnings plowed back into the firm.

Question

Quizplus · Accepted Answer

Retained earnings are not the difference between paid-in capital and total dividends paid. Instead, they are the cumulative amount of net income that a company retains, rather than distributing it as dividends to shareholders.

All of the Following Are True of Retained Earnings Except