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Banking Term: Retained Earnings

Jan 17, 2015 17:40 IST

    Retained earnings are defined as the portion of net income of a corporation that is retained by the corporation rather than distributed to shareholders as dividends.

    Retained Earnings (RE) = Beginning RE + Net Income – Dividend

    The formula calculates retained earnings by adding net income to (or subtracting any net losses from) beginning retained earnings and subtracting any dividends paid to shareholders.

    Which of the following sentence is not correct for retained earnings?

    a) Investors can think of retained earnings as the amount of profit the company

    b) It is a part of earnings that is not paid out as dividends

    c) Retained Earnings is a balance sheet account

    d) None of these

    e) All of these

    Ans. (d)

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