Dad,tomorrow we are going to learn about retained earning. Can you tell me about it?
Sure beta,This is a very intresting topic.
What is retained earning?
It refers to the portion of the earnings left with the company after distribution of dividend to its shareholders.
What are the merits of retained earning?
(i) Retained earnings are a permanent source of funds available to an organisation.(ii) It does not involve any explicit cost in the form of interest, dividend or floatation cost.
Tell me about its demerits too?
(i) Since the profits of business fluctuate from time to time, it is an uncertain source of funds.(ii) There is imbalanced growth as undistributed profits remain in the same industry.
Lastly can you please tell me about the features?
Sure beta. the features are: COST OF FINANCING,FLOATATION COST, CONTROL AND LEGAL FORMALITIES
Yes Dad. Thank you so much for your help. Bye Dad
Now go and play. I am sure you will suprise your teacher tomorrow.
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