Practice question · Multiple choice
A firm has been profitable for years but has never paid a dividend. Where does all that profit sit?
Hints
- Where does net profit flow at closing?
- Retained = kept inside.
Show the answer
B. In retained earnings, within equity
Why
Net profit flows into retained earnings at each closing. Retained earnings is the cumulative total of all profits ever earned minus all dividends ever paid, the firm's internal financing history.
Practise Liabilities and Equity
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