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Definition and Examples of

Retained Earnings

Explanation: Retained earnings refer to the portion of net income that is retained by the company rather than distributed to its shareholders as dividends. It’s an important source of capital for growth.

Example: Your boutique’s retained earnings include profits reinvested in the business, such as for buying more inventory or expanding the store.

Potential Issues: Mismanagement of retained earnings can impact a company’s growth and operational efficiency. Excessive retention can lead to inefficient capital allocation, while too little can hamper growth and development.

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