alleryStart learning →Does a large retained earnings balance mean the company holds surplus cash?
AYes, in a bank deposit
BYes, equal cash is held
CNo, it may be reinvested
DNo, it is always paid out
Answer & Solution
Correct answer: C. No, it may be reinvested
Retained profits are often reinvested in assets or used to cut liabilities, so the balance is not spare cash.
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