Surplus not distributed (retained earnings) could contribute to

A. Financial disaster for a company

B. Financial soundness of a company

C. Discredit of a company in the eyes of public

D. Liabilities of a company

Answer: Option B

Solution(By Examveda Team)

Retained earnings refer to the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt. Retained earnings contribute to the financial soundness of the company.