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What causes retained earnings in a company to increase?

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April 07, 2007 8:26PM

profits More specifically, profits that are not distributed to shareholders as dividends are maintained in the retained earnings section of the equity section of the balance sheet. For tax purposes, since dividends are after tax on the company and then taxed again on receipt by the sghareholder, the company must show a compelling business reason to keep them instead of distributing them. This is generally not too difficult to do.