Retained Earnings

The portion of net income retained for reinvestment in the company rather than being paid in dividends to shareholders. But remember, retained earnings of, say, $10 million doesn't mean the company has $10 million sitting around in cash. Instead it means that over the years the company has held back $10 million in profits which, in all likelihood, it invested in new factories, trucks and so forth in furtherance of its business. So retained earnings are really just another stockholder claim on assets, rather than any specific asset in and of themselves.

 

 

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