In the income method, undistributed profit of a company is what type of income?
Answer and explanation
Correct answer: Profit
Undistributed profit is the portion of a company’s profit retained in the business instead of being paid to shareholders as dividends. It remains a return generated by entrepreneurial and business activity and is included with operating surplus or profit in the income method. Retention does not change its nature into wages, interest or a transfer payment. Hence, option A is correct.
Frequently asked questions
What is the correct answer to this question?
Profit
Why is this the correct answer?
Undistributed profit is the portion of a company’s profit retained in the business instead of being paid to shareholders as dividends. It remains a return generated by entrepreneurial and business activity and is included with operating surplus or profit in the income method. Retention does not change its nature into wages, interest or a transfer payment. Hence, option A is correct.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Income Method.
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