Question

How do Financial Cash Flows (FCF), Net income, and Retained earnings impact one another?

Answer 1

Financial cash flows is the cash flows which are available to the companies after deduction of all the outflows like operating expense and net income and is always after the deductions all the probable expenses which will include non operating expenses as well.

Retained earnings are the earnings which are only for the equity shareholders of the company because those are the parts of the profits of company which have been kept by the company in the the retained earning account for the future uses.

all these three are interlinked because when financial cash flows will be higher, it will mean that it will put the net income higher, and net income is higher it will mean that the free cash flows to the equity will be higher and after payment of dividend it will be transfer to retained earning, so all three are interlinked and interdependent in nature.