All of the following are true of retained earnings except:
A)It is the difference between paid in capital and the total dividends paid
B)It represents the amount of new capital shareholders indirectly contribute
C)It is equal to one minus the payout ratio
D)It is the amount of earnings plowed back into the firm

Question

Quizplus · Accepted Answer

Retained earnings are not the difference between paid-in capital and total dividends paid. They represent the cumulative amount of net income that a company retains, rather than distributing it as dividends, and are not directly related to paid-in capital.

All of the Following Are True of Retained Earnings Except