Undivided Profit

DEFINITION of 'Undivided Profit'

Gains from current and past years that have not been transferred to a surplus account or distributed as dividends to shareholders. Undivided profit refers to corporate earnings that have accumulated over a period of time.

BREAKING DOWN 'Undivided Profit'

Current earnings may be credited to the undivided profits account and will eventually either be distributed to shareholder in the form of dividends or will be held within the company in the form of retained earnings. Dividend distributions signal strong financial strength within the company while retained earnings can be used to further future growth; the desired strategy depends on the amount of profit generated and the potential for value maximizing projects.

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RELATED FAQS
  1. How do dividends affect retained earnings?

    Find out how distribution of dividends affects a company's retained earnings, including the difference between cash dividends ... Read Answer >>
  2. In a Corporation's financials, surplus earnings are accounted for as ...

    D is the correct answer. Surplus earnings are either plowed back into the company (retained earnings) or they are paid out ... Read Answer >>
  3. How do you calculate retained earnings per share?

    Research the amount of retained earnings per share compared over time to understand whether or not a company uses its profits ... Read Answer >>
  4. Are dividends considered an expense?

    Learn how dividends are accounted for and why cash or stock dividends on common or preferred shares are not considered an ... Read Answer >>
  5. Why is there controversy over the use of the information ratio?

    Understand the effect that stock dividends have on a company's retained earnings account and how large and small dividends ... Read Answer >>
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