Undistributed profits of a firm are
A)earnings that are used to pay dividends to shareholders.
B)earnings that are used to cover the costs of production.
C)earnings that are used to cover interest expenses of the firm.
D)profits that are paid out to owners of the firm.
E)profits that are available to be reinvested in the firm's operations.

Question

Quizplus · Accepted Answer

Undistributed profits refer to profits that are not paid out as dividends to shareholders or used to cover any specific expense of the firm. Rather, these profits are available to be reinvested in the firm's operations. Option A, D and C are incorrect as they do not accurately describe undistributed profits. Option B is referring to costs of production which is not related to undistributed profits.

Undistributed Profits of a Firm Are