Knowing What It's A Detained Profit: Understanding, Function, And How To Calculate It

Illustration of retained earnings (Unsplash)

YOGYAKARTA For those of you who learn accounting or who work as an Account Officer, of course you know what profit is being held back, which is a term that is often used in financial reports. The profit refers to the amount of net profit that is not divided among shareholders in a certain period of time.

This article will discuss information related to retained earnings ranging from understanding, function, and how to calculate them.

Profit is a net profit obtained from business activities. Meanwhile, profit was withheld is a net profit that should have been divided among dividend-shaped investors, but was deliberately detained.

The term profit is stuck very closely with dividends. The term dividend itself is the right of shareholders to get the company's profit from business activities. On the other hand, the company also needs retained profits for various purposes.

Profits can be called dividends when profits are stuck are finally distributed to shareholders. However, when the company looks at the good prospects that require capital, the profits obtained will be retained in the form of retained profits.

The existence of retained profits is carried out so that there are reserve funds or capital, or used for the company's investment purposes. The decision to raise funds was made based on a joint decision taken at the General Meeting of Shareholders (GMS). Funds are restrained and raised with various factors that are taken into consideration, such as financial conditions or marketing strategies.

The emergence of suspended funds can also be based on operational funding requirements in the next period or due to the influence of the company's ups and downs of profitability.

Profits are held back in a company that has considerable benefits, especially related to business development and financial health. The benefits of retained profits are as follows.

Profit is suspended to become a reserve capital. This capital is very useful, especially when the company is in a difficult financial position.

The company's debt could be paid off on time by taking a retained profit. This fund is very helpful compared to the company having to apply for a loan to pay the maturing loan.

Business operations must be met immediately, one of the sources of funds that can be taken is that the funds are withheld. With these funds, business activities are not disrupted.

Business development can be done with capital. If the capital is lacking, the company can apply for funds to be stuck in the GMS. Business development not only benefits the company but also the shareholders.

Profits held back must also be reported transparently by the company. The following are how and steps to calculate profits are stuck.

The first step that must be known first is gross profit with a gross profit formula = the cost of goods sold.

Operating profit is a difference in gross profit with operating costs. This profit is calculated by an operating profit formula = gross profit operational costs.

This profit is obtained by formulating operational profit (interest + amortization + depreciation).

Not only net profit before tax, but the company must also calculate taxable net profit with a net profit formula after tax = net profit before tax tax rates.

After getting the figure from the above profit, the retained profit can only be calculated, namely the net profit formula after the dividend tax.

In addition to knowing that profit is being held back, it is recommended to know how to calculate dividends in stock investment so that investment activities run well.

That's information regarding what profit is being held back. Visit VOI.ID to get other interesting information.