Question

After earning $30 million in net income, rolatrim industries distributed $5 million in dividends to their stockholders. the board of directors of the firm decided to invest the remaining $25 million back into the business. this $25 million reinvestment of profits represents:

Answer 1

Answer:

Retained earnings

Explanation:

The proportion of profit not distributed as dividend is known as retained profit or earning. Directors are empowered by the company to decide how much of a company's income is paid out as dividend an retained as earning.

Profits are retained with the expectation that when re-invested they would generate more profit.