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05.07.2022 - 00:06

How can you fix negative retained earnings?

Question:

How can you fix negative retained earnings?

Answers (1)

Jaunita April 5, 2023 в 09:06

Negative retained earnings can be fixed by generating profits through increased sales, cost-cutting measures or reducing dividends. Retained earnings represent the cumulative profits of a company that have not been distributed to shareholders as dividends. If a company experiences losses for a prolonged period, the retained earnings become negative, indicating that the company has accumulated more losses than profits. To fix negative retained earnings, a company needs to generate profits through increased sales, reducing expenses or taking other measures to increase revenue. Companies can also reduce dividend payouts or suspend them altogether to channel the funds towards the business operations. By reducing expenses and increasing revenue, a company can generate positive retained earnings, indicating that it has more profits than losses.

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