The change in retained earnings is often the product of both an operating and a financing activity.

Question

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Retained earnings can increase through operating activities, such as generating profits and reinvesting them in the business, and through financing activities, such as issuing new stock or taking on debt. Similarly, retained earnings can decrease through operating activities that result in losses, or through financing activities such as buying back stock or paying off debt.

The Change in Retained Earnings Is Often the Product of Both