Which term is the profit kept by a business for future investments?

Which term is the profit kept by a business for future investments?

• A. Dividends
• B. Retained Profit
• C. Net Income
• D. Gross Profit

Answer: (B)

Retained profit refers to the portion of the business's profit that is kept in the company for future investments. It represents earnings that are reinvested rather than paid out to shareholders as dividends, helping fund growth, equipment, research, or debt reduction. Dividends are distributions of profits to owners; net income is the total profit after all expenses and taxes have been deducted; gross profit is sales revenue minus the cost of goods sold and does not account for other operating expenses. Therefore, the term that best matches the idea of keeping profits inside the business for future use is retained profit.

Retained profit refers to the portion of the business's profit that is kept in the company for future investments. It represents earnings that are reinvested rather than paid out to shareholders as dividends, helping fund growth, equipment, research, or debt reduction. Dividends are distributions of profits to owners; net income is the total profit after all expenses and taxes have been deducted; gross profit is sales revenue minus the cost of goods sold and does not account for other operating expenses. Therefore, the term that best matches the idea of keeping profits inside the business for future use is retained profit.