Undistributed profits are mainly used for three purposes:
1, to make up for the losses of previous years;
2. Capital increase refers to the issuance of stocks or the conversion of reserve funds into share capital. Although the transfer of capital cannot increase the total owner's equity. On the one hand, it can change the capital structure of enterprises, increase the shares held by investors, increase the circulation of company stocks, activate stock prices, and improve the trading volume of stocks and the liquidity of capital;
3. Cash dividends. The reason why the company's cash dividend is stable is because the undistributed profit remains stable. Even if losses are caused by force majeure, undistributed profits can be used as long-term dividends.
Second, analyze the details
The accumulation of undistributed profits is a kind of protection for investors, and the steady growth of undistributed profits is also the performance of the stable development of enterprises.
Third, how did the undistributed profits come from?
Total undistributed profit at the end of the period = undistributed profit at the beginning of the period+realized net profit in the current period-withdrawn surplus reserve in the current period-profit distributed to investors in the current period. The composition of total undistributed profits can be seen from the publicity. First, the previous undistributed profit, that is, the surplus profit of the enterprise over the years, plus the net profit of the enterprise, deducting the surplus reserve, and then deducting the dividends to investors.