If the retained earnings figure in a company balance sheet increases from the beginning of the year to the end of the year, it is most probable that:
A) profit for the year is more than dividends declared.
B) bonus shares have been issued.
C) additional capital has been raised during the year.
D) profit for the year is less than dividends declared.

Question

Quizplus · Accepted Answer

Retained earnings are the profits of a company that have not been distributed to shareholders as dividends. Therefore, if retained earnings increase from the beginning of the year to the end of the year, it means that the profits generated during the year were greater than the dividends declared.

If the Retained Earnings Figure in a Company Balance Sheet