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 earnings times the quantity 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. They represent the cumulative amount of net income that a company retains, rather than distributes as dividends, and are not directly related to paid-in capital.

All of the Following Are True of Retained Earnings Except