24: A.2. Preferred Stock

Question 1

What is the meaning of appropriate retained earnings?

Answer 1

It means the management is setting aside part of the profits to use it for a particular purpose, like a company has 100,000, and it is appropriate to keep 40,000 for investing

Inappropriate retained earnings occur when the retained earnings are set in the company, available to use for how the company wants, but it’s just sitting there