What are Accumulated Earnings?
” Sometimes referred to as earned surplus, accumulated earnings are revenue or earnings that are received by a company, but are not paid out as dividends to the investors of the company. There are several reasons why accumulated earnings are important to the financial stability of many corporations. Here are some examples of how accumulated earnings can be an asset in business operations. . The key point to remember about accumulated earnings is that the earnings represent revenue generated by the company. More importantly, accumulated earnings illustrate that the company is making a profit that is capable of generating dividends for the investors.
Sometimes referred to as earned surplus, accumulated earnings are revenue or earnings that are received by a company, but are not paid out as dividends to the investors of the company. There are several reasons why accumulated earnings are important to the financial stability of many corporations. Here are some examples of how accumulated earnings can be an asset in business operations. The key point to remember about accumulated earnings is that the earnings represent revenue generated by the company. More importantly, accumulated earnings illustrate that the company is making a profit that is capable of generating dividends for the investors. The fact that the company is successful enough to pay dividend benefits to investors is one way of demonstrating a healthy corporation. However, instead of paying dividends to investors, the retained earnings are reinvested in the company in one of two ways. First, the unappropriated profit may be used to pay down any outstanding debt currently
