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Retained profit
Retained profit, also known as retained earnings, is the portion of a company's profits that is not paid out as dividends to shareholders but is instead retained by the company for future use. Retained profits can be used for a variety of purposes, including funding operations, investing in new equipment or technologies, paying off debt, or increasing the company's cash reserves.
Retained profits are an important source of capital for companies, and they can be used to help the company grow and expand. However, retained profits are also a source of conflict between shareholders and management, as shareholders may prefer to receive higher dividends, while management may prefer to retain profits in order to fund future investments.
It is important for companies to strike a balance between paying dividends to shareholders and retaining profits for future growth. This can be influenced by a variety of factors, including the company's financial performance, its growth prospects, and the expectations and preferences of shareholders.
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3.3.4 Business Profits (Edexcel A-Level Economics Teaching PowerPoint)
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