why is retained earnings not equal to cash?
328119
It is important to understand that retained earnings do not represent surplus cash or cash left over after the payment of dividends. Rather, retained earnings demonstrate what a company did with its profits; they are the amount of profit the company has reinvested in the business since its inception.
1103623
'Retained earnings' is money held by a company to either reinvest in the business or pay down debt. 'Retained earnings' are also earnings that have not been paid to shareholders via dividends. Shareholders' equity is the net of a company's total assets and its total liabilities.
103329
The key difference between the two is that reserves are a part of retained earnings, but retained earnings are not a part of reserves. Reserves are a part of a company's profits, which have been kept aside to strengthen the business financial position in the future, and fulfil losses (if any).
248082
Retained earnings represent the capital remaining after net income is paid out to investors and shareholders via dividends. ... The opportunity cost of retaining earnings is dividends, and is therefore equivalent in cost to the equity that expects those dividends.
95874
It's important to note that retained earnings are an accumulating balance within shareholder's equity on the balance sheet. Once retained earnings are reported on the balance sheet, it becomes a part of a company's total book value.
1073975
Net income increases Retained Earnings, while net losses and dividends decrease Retained Earnings in any given year. Thus, the balance in Retained Earnings represents the corporation's accumulated net income not distributed to stockholders. When the Retained Earnings account has a debit balance, a deficit exists.
1322108
Retained earnings are listed under liabilities in the equity section of your balance sheet. They're in liabilities because net income as shareholder equity is actually a company or corporate debt.
973765
Retained earnings is recorded in the shareholder equity section of the balance sheet rather than the asset section, and usually does not consist solely of cash. For these reasons, retained earnings is not a current asset.
763202
Since retained earnings has no connection to net-cash flow, it does not appear on the cash-flow statement that lists all changes in cash and cash equivalents for the period. Instead, retained earnings has its own separate financial statement called the retained-earnings statement.
560098
You see, bad debts are not an actual flow of cash. It's just an accounting entry (a loss or expense) but there is no actual cash involved in the transaction. So it's included as an expense in the income statement but not included as a line item in the cash flow statement.
613966
Retained earnings are affected by any increases or decreases in net income and dividends paid to shareholders. As a result, any items that drive net income higher or push it lower will ultimately affect retained earnings.
1435176
Is Retained Earnings an Asset? Retained Earnings is the collective net income since a company began minus all of the dividends that the company has declared since it began. It is recorded into the Retained Earnings account, which is reported in the Stockholder's Equity section of the company's balance sheet.
901616
Retained earnings can be used to pay debt and future dividends, or can be reinvested into business activities. ... Companies with increasing retained earnings is good, because it means the company is staying consistently profitable. If a company has a yearly loss, this number is subtracted from retained earnings.
1038683
It is because neither dividend nor interest is payable on retained profit. ... In other words, retained earning is not a cost free source of financing. The cost of retained earning must be at least equal to shareholders rate of return on re-investment of dividend paid by the company.
656693
Retained Earnings' Normal State Equity accounts possess credit balances when positive and debit balances when negative. In most cases, retained earnings has a credit balance, receiving a credit when it increases and a debit when it decreases.
488446
Retained earnings are considered part of owner's equity, which stands for the claim that a business's owners have on its assets after all liabilities are deducted. ... The higher the depreciation expense, the lower the net income, the lower the retained earnings and thus the lower the owner's equity.
613269
No, retained earnings is not a current asset for accounting purposes. A current asset is any asset that will provide an economic benefit for or within one year. Retained earnings refers to the amount of net income a company has left after paying dividends to shareholders.