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Not necessarily. The balance in retained earnings means that the company has been profitable over the years and its dividends to stockholders have been less than its profits. It is possible that a company with billions of dollars of retained earnings has very little cash available today.
One possible explanation for the small amount of cash in relation to the retained earnings is that the company invested in new plant assets in order to expand its operations. Rather than distributing the company's cash to its stockholders, the company used the cash to pay for the factory and equipment in order to meet demand for its new product line.
Corporations might have a stated policy on dividends. For example, a corporation might pay dividends equal to approximately40% of its earnings. Another corporation might have a plan to increase the amount of dividends each year by more than the rate of inflation. A new corporation might pay no dividends until its ratio of debt to equity is a specified percentage.
A large balance in retained earnings usually means that the company has been profitable over the years. This does not necassarily mean that the company has given out huge dividends over the years. The company might have leas cash available, as it has used most of its retained earnings on buying new assits to meet the product demand, rather than using it to pay it stockholders.
Not necessary. generally these retained profits are kept for the purpose of future expansions or purchase of another company. Sometimes this may be used to offset future losses, it may incur.
No not necessarily.Non declaration of dividend is a type of internal financing.Out of this retained earnings,bonus shares can be issued leading to reduction of retained earnings and increase of equity share capital.
Although and usually retained earnings are used for future investment and paying dividends to shareholders, this necessarily doesn't mean that a huge balance will result in huge dividends. Payment of dividend depends upon BOD's discretion and law that governs the entity
Dividends are usually paid usually following a dividend policy which could be a constant policy (i.e. a certain percentage of profits), increasing policy (i.e. percentage increase over last year) or simply a flat payout policy (i.e. certain Sr. or cents per share). So even if the RE has a lot of accumulations dividends are likely to be paid using a company ploicy.
An increasing balance of retained earning will depend on how it is utilized by the concern based on current situation and shareholder/market sentiment.
Not necessary in retained earnings means that the company has been profitable over the years and its dividends to stockholders have been less than its profits. It is possible that a company with millon of dollars earnings but has very little cash.
Rather than distributing the company's cash to its stockholders, the company used the cash to pay for thenew equipment in order to meet demand for its new product.
Up to some extend agreed but not enitely , reason is that :-
Retained earning and share capital account represent the equity of the ownes and if the retained earning has large amount means the value of the firm or company inrease
but it doest mean only that the dividend sahre increases. Because the it is one of the uses about the retained earning but others uses are also.
Retained earning used for
