Retained earnings is the cash that has been generated by the firm through its operations which has not been paid out to stockholders as dividends. Retained earnings are kept in cash or near cash accounts and thus, these cash accounts, when added together, will always be equal to the total retained earnings of the firm.

Question

Quizplus · Accepted Answer

Retained earnings are not necessarily kept in cash or near-cash accounts; they represent the cumulative net income not distributed as dividends and can be reinvested in the business, used to pay off debt, or held in various forms of assets, not just cash.

Retained Earnings Is the Cash That Has Been Generated by the Firm