SEOUL, Oct. 4 (Korea Bizwire) — The value of the aggregate retained earnings piled up by South Korea’s top 100 companies has continued to increase over the past 10 years, surpassing the 1,000 trillion won (US$697 billion) mark last year, data showed Monday.
According to the data that Rep. Hong Sung-kook of the Democratic Party received from the National Assembly Budget Office, the combined retained earnings of those leading firms amounted to 1,025 trillion won last year, up 395 trillion won from 2012.
During this period, aggregate retained earnings grew by 6.3 percent per year on average, dwarfing the average annual revenue growth of 1.6 percent.
Retained earnings refer to accumulated earnings held by a company after taxes and dividends are paid out. The reserves also include capital surpluses.
A gain in such surplus cash reserves usually reflects a firm’s improved financial health, but it also could mean the company is reluctant to spend on investment, hiring and dividends.
The retained earnings of the 10 biggest business groups stood at 448 trillion won last year, up 188 trillion won from 2012.
For the top 100 firms, the ratio indicating the proportion of retained earnings to revenues rose to 62 percent last year from 46.7 percent in 2012. For the top 10 companies, the ratio rose from 53.4 percent to 80.1 percent during the same period.
The primary factors behind the sharp increase in retained earnings include the growing uncertainty over internal and external investment conditions and the economic slowdown.
To prepare for difficult times ahead, businesses are showing a tendency to set aside the money they earn rather than using it for investment.
Ashley Song (email@example.com)