5 min read•Last Updated on July 30, 2024
Retained earnings are a crucial part of stockholders' equity, representing a company's cumulative profits minus dividends paid. They show a firm's ability to generate and retain profits, providing insights into its financial health and growth potential.
Appropriations of retained earnings are amounts set aside for specific purposes by the board. These allocations signal the company's intentions for using retained earnings, whether for contingencies, future projects, or meeting legal requirements, without changing total stockholders' equity.
Glossary: Lesson 2 | Financial Accounting View original
Is this image relevant?
The Basics of Accounting | Boundless Accounting View original
Is this image relevant?
Basic Accounting Procedures | OpenStax Intro to Business View original
Is this image relevant?
Glossary: Lesson 2 | Financial Accounting View original
Is this image relevant?
The Basics of Accounting | Boundless Accounting View original
Is this image relevant?
1 of 3
Glossary: Lesson 2 | Financial Accounting View original
Is this image relevant?
The Basics of Accounting | Boundless Accounting View original
Is this image relevant?
Basic Accounting Procedures | OpenStax Intro to Business View original
Is this image relevant?
Glossary: Lesson 2 | Financial Accounting View original
Is this image relevant?
The Basics of Accounting | Boundless Accounting View original
Is this image relevant?
1 of 3
Appropriations refer to the formal allocation of funds set aside for specific purposes within a company's financial statements, particularly relating to retained earnings. This practice helps organizations manage their profits by designating portions of retained earnings for future projects, reserves, or specific operational needs, thereby influencing financial strategy and reporting.
Term 1 of 13
Appropriations refer to the formal allocation of funds set aside for specific purposes within a company's financial statements, particularly relating to retained earnings. This practice helps organizations manage their profits by designating portions of retained earnings for future projects, reserves, or specific operational needs, thereby influencing financial strategy and reporting.
Term 1 of 13
Retained earnings refer to the cumulative amount of net income that a company has retained, rather than distributed as dividends to shareholders. This figure represents the portion of a company's profits that is reinvested in the business for growth, debt repayment, or other operational needs, and it is a crucial component of equity on the balance sheet.
Dividends: Dividends are payments made by a corporation to its shareholders, typically derived from profits. They can be in cash or additional shares and represent a return on investment for the shareholders.
Stockholders' Equity: Stockholders' equity is the residual interest in the assets of a company after deducting liabilities. It encompasses retained earnings, paid-in capital, and other equity components.
Appropriated Retained Earnings: Appropriated retained earnings are portions of retained earnings that are set aside for specific purposes, such as future investments or debt obligations, indicating that those funds are not available for dividends.
Appropriations refer to the formal allocation of funds set aside for specific purposes within a company's financial statements, particularly relating to retained earnings. This practice helps organizations manage their profits by designating portions of retained earnings for future projects, reserves, or specific operational needs, thereby influencing financial strategy and reporting.
Retained Earnings: Retained earnings are the accumulated profits of a company that have not been distributed as dividends to shareholders and are instead reinvested in the business.
Dividends: Dividends are payments made by a corporation to its shareholders, typically derived from retained earnings, representing a share of the company's profits.
Financial Statements: Financial statements are formal records of the financial activities and position of a business, providing a summary of its financial performance over a specific period.
Net income is the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue. It serves as a key indicator of a company's profitability and financial health, providing insight into how efficiently a business is operating and whether it is generating enough revenue to cover its costs.
Gross Profit: Gross profit is the revenue from sales minus the cost of goods sold (COGS), reflecting the efficiency of production before accounting for other operating expenses.
Operating Expenses: Operating expenses are the costs required to run a business that are not directly tied to producing goods or services, such as rent, utilities, and salaries.
Earnings Per Share (EPS): Earnings per share (EPS) is a financial metric calculated by dividing net income by the number of outstanding shares, used to assess a company's profitability on a per-share basis.
A balance sheet is a financial statement that provides a snapshot of a company's assets, liabilities, and equity at a specific point in time. It shows what the company owns and owes, offering insight into its financial health and stability.
Assets: Resources owned by a company that have economic value and can provide future benefits.
Liabilities: Obligations or debts that a company is required to pay to outside parties.
Equity: The residual interest in the assets of the entity after deducting liabilities, representing the ownership value held by shareholders.