Write short notes on :(a) Retained earnings (b) Trade credit.

1.	Write short notes on :(a) Retained earnings (b) Trade credit.
Answer» (a) Retained earnings : A company generally does not distribute all its earnings amongst the shareholders as dividends. A portion of the net profit may be retained in the business for use in the future. This is known as retained earnings. It is a source of internal financing or self financing or ploughing back of profit. The profit available for ploughing back of profit in an organisation depends on many factors like profit, dividend policy and age of the organisation. (b) Trade Credit : Trade Credit is the credit extended by one trader to another trader for the purchase of goods and services. Trade credit facilitates to purchase of goods and services without immediate payment. It is granted to those customers who have reasonably good financial standing and goodwill.

Answer»

(a) Retained earnings : A company generally does not distribute all its earnings amongst the shareholders as dividends. A portion of the net profit may be retained in the business for use in the future. This is known as retained earnings. It is a source of internal financing or self financing or ploughing back of profit. The profit available for ploughing back of profit in an organisation depends on many factors like profit, dividend policy and age of the organisation.

(b) Trade Credit : Trade Credit is the credit extended by one trader to another trader for the purchase of goods and services. Trade credit facilitates to purchase of goods and services without immediate payment. It is granted to those customers who have reasonably good financial standing and goodwill.

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