![]() It allows you to see how much capital you have available at the end of a financial period. This calculation can give you a quick snapshot of the cash flow and pacing of the revenue of your business. This helps for planning the future of the business, reinvesting - hiring talent, buying inventory, upgrading tech, etc. This figure tells you if your business has surplus income, or if you’re operating at a loss. How to interpret your retained earnings calculation Once those returns are realized, they could be more of a benefit to shareholders than annual dividend payouts. ![]() This is especially the case if the project is slated to generate substantial returns down the road. If there is a high-growth project in sight, such as global expansion, both management teams and shareholders alike might prefer to retain the company earnings for a few years or more. Yet, shareholders do retain the right to challenge any decision to withhold surplus funds from distribution, as they are the true company owners. Normally, company management will make the decision on whether to retain all of the earnings or distribute them back among the shareholders. Reinvesting this surplus back into the company is an ideal way to move it forward.
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