Retained earnings on the balance sheet represents the ________.
A) net profit after taxes
B) amount of proceeds in excess of the par value received from the original sale of common stock
C) net profit after taxes minus preferred dividends
D) cumulative total of all earnings reinvested in the firm

Question

Quizplus · Accepted Answer

Retained earnings on the balance sheet represents the cumulative total of all earnings reinvested in the firm. This includes net profits after taxes, minus dividends paid to preferred shareholders. It is a measure of how much the company has reinvested to grow its business rather than paying dividends to shareholders or using the profits for other purposes, such as buying back stock.

Retained Earnings on the Balance Sheet Represents the ________