Advertisements
Advertisements
Question
What is the Importance of Retained Earnings?
Short Answer
Advertisements
Solution
The company keeps a portion of its net income as reserves for potential future usage. We call this Retained Earnings. Ploughing back of profits is another name for this strategy of preserving money for later use.
Importance of Retained Earnings are:
- A Permanent Source of Funds
- No Explicit Cost of Funds
- Operational Freedom and Flexibility
- Loss Absorption
- Appreciation in the Value of Shares
shaalaa.com
Is there an error in this question or solution?
