What term is used for the cumulative profits retained in a business up to the date of the balance sheet?

The term that describes the cumulative profits retained in a business up to the date of the balance sheet is "Retained Earnings." Retained earnings represent the portion of net income that is not distributed to shareholders as dividends but is instead reinvested in the company or used to pay off debt. This figure is vital for understanding how much profit a company has retained over time and is found on the equity section of the balance sheet.

Operating income refers to the profit a company makes from its normal business operations, excluding expenses associated with non-operational activities and income from investments. While it reflects profitability from operations, it does not include profits that have been retained over multiple periods.

Net income is the total profit of a company after all expenses, taxes, and costs have been deducted from total revenue. While net income contributes to retained earnings, it is a singular measure for a specific accounting period, rather than the cumulative amount retained over time.

Gross profit represents sales revenue minus the cost of goods sold (COGS), indicating how efficiently a company uses its resources to produce goods for sale. It focuses on the basic profitability of production and sales, but it does not account for other operational expenses, taxes, or retained earnings.

Thus, the concept of retained earnings encapsulates