Retained-Earnings

When a company goes into business or if you yourself go into business, you want to ensure you have earnings. With that, there is also the retained earnings number, which is beginning retained earnings minus dividends.

Updated over a year ago
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Retained earnings are important because if you invest in a company, you want to know they are earning money and are able to keep some for themselves. Looking at the balance sheet, of course you want to see some dividends because that means the company is doing well and internal people being incentivized, but you do not want all the money going out.

How important is MEDALLION FINANCIAL's Liquidity

MEDALLION FINANCIAL financial leverage refers to using borrowed capital as a funding source to finance MEDALLION FINANCIAL CORP ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. MEDALLION FINANCIAL financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between MEDALLION FINANCIAL's total debt and its cash.

How does MEDALLION utilize its cash?

To perform a cash flow analysis of MEDALLION FINANCIAL, investors first need to understand how to read the cash flow statement. A cash flow statement shows the amount of cash MEDALLION FINANCIAL is receiving and how much cash it distributes out in a given period. The MEDALLION FINANCIAL cash flow statement breaks down these inflows and outflows into different buckets, including operating activities, investing activities, and financing activities.

If you are looking at this number and it appears to be small compared to others in the industry, you may want to look at a few things. First, ensure the company has enough money to be paying dividends because if they are doing poorly and money is still going to shareholders, it may not be the best situation. Secondly, you want to take a look at the underlying health of the company and ensure sales and revenue is coming. If there is a critical error cause the low retained earnings, it may be an indication of what is to come. Lastly, this number may be low because they are reinvesting or paying larger dividends due to the success of the company. Be sure to fully understand the story to understand the rhyme and reason for the number.

Some companies pay constant dividends, some pay no dividends, and others pay dividend that are special, such as when the company is doing exceptionally well. The focus on dividends is important as it is a part of the equation and is one of the most controllable parts of the retained earnings.

This numbers is fantastic for fundamental research and should certainly be used in your research. In no way would it hurt looking at this number and it will only bring value. Be sure to look at other areas of the company and their financials because this may not tell the whole story. Retained earnings are important though because the company needs to keep some money for itself. If you get stuck, reach out to an investing community and bounce your ideas off of them. Should that not work, reach out to your investing professional and they can help to point you in the right direction. Retained earnings is a critical part in the balance sheet and needs to be monitored during and after you invest in a particular company.

Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Nathan Young do not own shares of MEDALLION FINANCIAL CORP. Please refer to our Terms of Use for any information regarding our disclosure principles.

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