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how can earned capital be considered as an investment by the company’s stockholders?

how can earned capital be considered as an investment by the company’s stockholders?

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Answer #1

Earned capital is called retained earning or accumulated profits, net income of company is either distributed in the form of dividend to stockholders or retained by the company for fulfilling the requirement of capital for future expansion. So part of the net income which is retained in the business is called shareholders equity and it comprises of contributed capital and retained earning (non distributable form of net income) so contributed capital is increased by the portion of retained earning and it increase the shareholders equity in the firm over the time and considered as investment by company stockholders.

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