Question

Retained earnings on the balance sheet?

a) increase as operating income increases
b) equals the sum of all net income before preferred dividends are deducted
c) equals common stock plus capital in excess of par
d) have already been reinvested in the firm

Answer 1

The answer is D. have already been reinvested in the firm

Step-by-step explanation:

Retained Earning is that part of income or profit that was not distributed out as dividend.

It is retained to grow the business or make the business bigger. It is part of shareholder's equity.

Option A is wrong. It doesn't increase with operating income. It depends on dividend policy and the net profit