Retained Earnings/Profit
Profits kept in business rather than distributed to shareholders.
Formula
Retained Earnings = Previous Retained Earnings + Net Profit − Dividends Paid
Real World
Amazon reinvested nearly all its profits for over a decade — paying no dividends — using retained earnings to fund AWS, Prime, and logistics infrastructure.
Exam Focus
When asked to 'justify' a source of finance, highlight that retained earnings carry no interest cost and no loss of ownership control.
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