ained earnings can be positive or negative. Retained earnings represent the cumulative of net income after tax or net losses after tax minus dividends paid to stockholders. It is not and does not represent cash on hand.
The Income Statement provides information about an organization's revenues, expenses and resulting net income or net loss. A company has a net income when revenues exceed expenses, and reports a net loss when expenses exceed revenues. Income Statements, with certain variations, follow this pattern:
Gross sales minus returns and allowances equals net sales
Net sales minus cost of goods sold equals gross profit
Gross profit minus selling, general and administrative expenses
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