Undistributed profits that have accumulated in the company over time are called : Retained earnings.
What is retained earning?
Retained earning is the amount of net income left over for the business after it has paid out dividends to its shareholders.
Retained earnings are the amount of profit a company has left over after paying all its :
- Direct costs
- Indirect costs
- Income taxes
- Dividends to shareholders.
Businesses can use these earnings to reinvest into the company for expansion through the purchase of property, plant and equipment or to pay off its debts.
Therefore, retained earnings is the distributed profits that have accumulated in the company over time.
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