The given statement exits false. The surplus cash left over for dividends should be considered to be part of the balance in retained profits. The balance sheet's stockholders' equity segment shows a shortfall in retained earnings.
<h3>What is meant by retained earnings?</h3>
The amount of profit that remains after a corporation has paid all of its direct costs, indirect costs, income taxes, and dividends to shareholders is known as retained earnings. This is the percentage of the company's equity that may be utilized, for example, to fund the purchase of new machinery, research and development, and marketing.
Dividends are not the main purpose of retained earnings. It is the amount of net income that is still available after dividends have been distributed to shareholders. The available balance of retained earnings serves as the source for dividends. Technically, the unappropriated (free) fraction of the aforementioned retained earnings is used to pay these dividends. The remaining retained profits balance should be understood as extra cash kept on hand for growing corporate operations rather than dividend payments.
The surplus cash left over for dividends should be considered to be part of the balance in retained profits. The balance sheet's stockholders' equity segment shows a shortfall in retained earnings. A company may be set up as a nonprofit organization or with the intention of producing a profit.
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