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Sagot :
Retained earnings is an example of a permanent account, meaning its balance is carried forward from one period to the next.
Administration and Retained Profits
The management of the company is often in charge of deciding whether to keep the profits or distribute them to the shareholders. Since they are the actual proprietors of the corporation, the shareholders can, by a majority vote, overturn it.
For a number of reasons, management and shareholders may prefer that the company keep the profits. The management may be considering a high-growth project because they are more knowledgeable about the market and the company's operations and may believe it has the potential to produce significant returns in the future.
Over time, these measures might produce superior returns for the company's stockholders than dividend payments.
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