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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
- UGC NET
- Commerce
What are retained profits ? how company is uses retained profit?
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Priya gulani
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Retained earnings are the portion of a company's cumulative profit that is held or retained and saved for future use. Retained earnings could be used for funding an expansion or paying dividends to shareholders at a later date.
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Ankita chauhan Best Answer
Retained profit is the profit kept in the company rather than paid out to shareholders as a dividend. Retained profit is widely regarded as the most important long-term source of finance for a business. Not all businesses make a profit. But when they do, the owners have a choice: • Take the profit out of the business – either as personal income or via a payment to shareholders • Effectively reinvest the profit by leaving it in the business Of course the owners can decide to do a little of both – pay a limited dividend and leave the remaining part of the profit in the bank.
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Priya gulani
The income money can be distributed (fully or partially) among the business owners (shareholders) in the form of dividends. It can be invested to expand the existing business operations, like increasing the production capacity of the existing products or hiring more sales representatives. It can be invested to launch a new product/variant, like a refrigerator maker foraying into producing air conditioners, or a chocolate cookie manufacturer launching orange- or pineapple-flavored variants. The money can be utilized for any possible merger, acquisition, or partnership that leads to improved business prospects. It can also be used for share buybacks. The earnings can be used to repay any outstanding loan (debt) the business may have.