Retained earnings are occasionally restricted

A) to set aside cash for dividends.
B) to keep the legal capital associated with share capital intact.
C) due to contractual loan restrictions.
D) if preferred dividends are in arrears.

Retained Earnings

The portion of a company's profit that is held back and not distributed to shareholders as dividends, to be reinvested in the business or used to pay off debt.

Contractual Loan Restrictions

Clauses in a loan agreement that limit the borrower's actions in certain ways to reduce the lender's risk.

Preferred Dividends

Payments made to preferred shareholders before any dividends are distributed to common shareholders, often at a fixed rate and with priority over common dividends.