As long as a firm does not pay out 100% of its earnings, the firm's annual profit that is retained in the business (i.e., the addition to retained earnings)is another source of funds for a firm's expansion.

Question

Quizplus · Accepted Answer

Retained earnings are the portion of a company's profits that are kept by the company instead of being distributed as dividends to shareholders. Retained earnings can be used as a source of funds for a firm's expansion or other purposes, as long as the company does not pay out 100% of its earnings in dividends. Therefore, the statement is true.

As Long as a Firm Does Not Pay Out 100