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Finance allah shmoop what are retained earnings You know when

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you eat really salty food and the next day you

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have cankles it's all that water desperately trying Teo get

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youto wiz out the loads of sodium chloride in your

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body That's retained water well retained earnings and i'll sort

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of work the same way you run a plastic cup

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stamping business with catchy little phrases on the cubs Last

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year you had a million bucks in sales and one

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hundred grand in after tax earnings About eighty grand of

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that earnings was in fact cash Why didn't you retain

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in cash one hundred percent of your earnings What happened

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to the twenty grand in cash there How did evaporate

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Well you had to spend cash out of your earnings

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on a cup plunging machine and then cost real cash

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dough You'll amber ties that cost over time now and

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get essentially a tax break because of it meaning you'll

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show lesson earning so you'll pay less in taxes but

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the cash won't change So this year's hundred grand was

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a nice year but last year you had fifty grand

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in cash profits and you had twenty grand in cash

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Profits the year before then and before then you had

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run it just cash flow break even for the previous

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five years So it all looked like that So in

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total you saved Or rather you retained cash earnings of

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eighty plus fifty plus twenty or a sum total of

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one hundred fifty grand That all now sits in your

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b of a account doing a whole lot of nothing

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of intern two percent a year for the privilege that

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one hundred fifty grand that you have cumulatively retained Like

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ankle's swelling is retained earnings which you will now use

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to print more catchy titles in foreign languages Maybe don't

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look up What those mean All right let's close the 00:01:49.043 --> [endTime] video now

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