Question

Which component of owners’ equity does the situation below indicate? Owners’ equity includes , ______ which is the amount of profits that your business has been able to save over the past few years.

Answer 1

Retained earning

Step-by-step explanation:

A company's profits are distributed to shareholders as dividends, retained in the business for reinvestment, or both. Therefore, retained earning are profits that were not distributed to shareholders. They are funds that belong to owners but withheld for use in the business.

Retained earnings form part of a company's capital. It is money that shareholders have contributed to the business by not sharing in profits.