PRC-3 · Chapter 4 · Question 53 of 65
At the end of a highly profitable year, a company's directors vote to keep 60% of the net income inside the business to purchase new equipment rather than paying it all out to shareholders. This 60% represents:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Retained earnings
Explanation
Retained earnings are a vital internal source of finance, representing the portion of net profit kept by the company to reinvest in growth rather than distributed as dividends.
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