An investor gets paid a dividend. An ownership stake in the company gives the investor (owner) the right to a portion of the company's earnings. This payout of a share of profits of a business to the owners is called a dividend.
The Retained Earnings account has no money in it. Retained Earnings represent the business's commitments to its stockholders. It is the number of past earnings that have not been paid out to owners.
<h3><u>Retained Earnings: What Are They?</u></h3>
After deducting dividend payments, a company's retained earnings are its total net earnings or profits. The term "retained" refers to a crucial idea in accounting that describes how earnings were held by the corporation rather than distributed to shareholders as dividends.
Because of this, retained earnings go down when a business experiences a loss or pays dividends and go up when new profits are generated.
<u>What are the retained earnings calculation and formula?</u>
RE = BP + Net Income (or Loss) - C - S, where:
BP = Starting Period RE
C = Cash dividends
S = stock dividends.
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