Following are some companies with negative Retained Earnings to Total Assets Ratios.
ticker industry retained_earnings total_assets RE_TA 1: STCN Integrated Freight & Logistics -7494.1020 147.299000 -50.876802 2: MACK Biotechnology -546.2240 14.639000 -37.312931 3: VIAV Communication Equipment -69529.9000 1878.000000 -37.023376 4: OMEX Specialty Business Services -283.3211 8.967281 -31.594982 5: REFR Electronic Components -120.3155 3.859915 -31.170499
And following are some companies with very high Retained Earnings to Total Assets Ratios.
ticker industry retained_earnings total_assets RE_TA 1: HHS Advertising Agencies 814.4390 111.114000 7.329760 2: WAT Diagnostics & Research 7960.6630 3041.269000 2.617546 3: LOPE Education & Training Services 1913.1300 918.386000 2.083144 4: CHKP Software - Application 11700.3000 5725.800000 2.043435 5: WW Personal Services 2675.7670 1419.426000 1.885105
- For the first set, how can retained earnings go so much negative while the company still has some assets. Won't these companies should already be bankrupt?
- For the second set, how can a company have retained earnings which is multiple times its assets? What the management is doing so that retained earnings are increasing and total assets are not increasing?
Both of the above scenarios are difficult to understand. Can someone explain how this is even possible?
Here is the inference of this ratio from the website but I am not sure how to interpret these extreme cases - https://accountinginside.com/retained-earnings-to-total-asset/
If the ratio = 0: It means the company relies 100% on debt and shareholder’s capital, they are not yet making any profit and be able to reinvest.
If the ratio = 1: It means the company relies 100% on retained earnings to operate and invest. It is almost impossible in real life. But the cases I showed above have this ratio of more than 1.
If the ratio >0 but <1: It means partial assets are funded by retained earnings while the rest are funded by debt or share capital. It depends on the percentage of ratio.