Accumulated income definition
/What is Accumulated Income?
Accumulated income is that portion of a company’s net profits that are retained, rather than being remitted to investors as dividends . The aggregate amount of accumulated income appears in the retained earnings section of the balance sheet .
A business needs accumulated income to help fund its operations. This is especially important for a growing business, which typically requires a substantial amount of working capital to pay for its ongoing investments in receivables and inventory , as well as fixed asset purchases. It may also invest the funds in research and development or marketing activities, which are essential for growing sales .
The amount of accumulated income tends to be lowest in slow-growth businesses, where the management team has no internal use for the money and so elects to send it to investors in the form of dividends or stock repurchases.