Which of the following describes retained earnings? Internally generated capital

Question

Which of the following describes retained earnings?

Internally generated capital that results from profitable business transactions

Externally generated capital that is contributed by shareholders

Externally generated capital that is raised from banks and other creditors

Internally generated capital that results from employees' contributions

Internally generated capital that results from profitable business transactions

Externally generated capital that is contributed by shareholders

Externally generated capital that is raised from banks and other creditors

Internally generated capital that results from employees' contributions

Explanation / Answer

Retained earnings are the accumulated net income retained by a corporation after the dividends are paid.

Retained earnings = Accumulated net income - Dividends paid

The answer is - Internally generated capital that results from profitable business transactions

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