Capital Stock

Finance allah shmoop what are retained earnings You know when

you eat really salty food and the next day you

have cankles it's all that water desperately trying Teo get

youto wiz out the loads of sodium chloride in your

body That's retained water well retained earnings and i'll sort

of work the same way you run a plastic cup

stamping business with catchy little phrases on the cubs Last

year you had a million bucks in sales and one

hundred grand in after tax earnings About eighty grand of

that earnings was in fact cash Why didn't you retain

in cash one hundred percent of your earnings What happened

to the twenty grand in cash there How did evaporate

Well you had to spend cash out of your earnings

on a cup plunging machine and then cost real cash

dough You'll amber ties that cost over time now and

get essentially a tax break because of it meaning you'll

show lesson earning so you'll pay less in taxes but

the cash won't change So this year's hundred grand was

a nice year but last year you had fifty grand

in cash profits and you had twenty grand in cash

Profits the year before then and before then you had

run it just cash flow break even for the previous

five years So it all looked like that So in

total you saved Or rather you retained cash earnings of

eighty plus fifty plus twenty or a sum total of

one hundred fifty grand That all now sits in your

b of a account doing a whole lot of nothing

of intern two percent a year for the privilege that

one hundred fifty grand that you have cumulatively retained Like

ankle's swelling is retained earnings which you will now use

to print more catchy titles in foreign languages Maybe don't

look up What those mean All right let's close the 00:01:49.043 --> [endTime] video now