The retained earnings account on the balance sheet does not represent cash.Rather, it represents part of stockholders' claims against the firm's existing assets.This implies that retained earnings are in fact stockholders' reinvested earnings.

Question

Quizplus · Accepted Answer

Retained earnings represent the portion of a company's net income that is reinvested back into the business instead of being paid out as dividends to shareholders. Retained earnings are not cash, but rather a part of stockholders' equity on the balance sheet, representing their claim to the company's assets. Therefore, retained earnings are indeed stockholders' reinvested earnings.

The Retained Earnings Account on the Balance Sheet Does Not