Its retained earnings is the actual cash that the firm has generated through operations less the cash that has 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 firm's total retained earnings.

Question

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Retained earnings represent the cumulative amount of net income earned by a company that is retained by the company rather than distributed to its shareholders as dividends. Retained earnings are not necessarily held in cash or near-cash accounts; they can be reinvested in the business, such as in equipment, inventory, or other assets.

Its Retained Earnings Is the Actual Cash That the Firm