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Explanation: Reserves in Equity Capital represent the accumulated earnings retained by a company over time, which are reinvested into the business rather than distributed to shareholders as dividends. These reserves contribute to the company’s equity capital and are typically generated from profits earned in previous financial years. Reserves play a crucial role in strengthening the company’s financial position, supporting future growth initiatives, and providing a cushion against financial uncertainties.
Example: Maruti Suzuki has Reserves in Equity Capital of 61,640.30 crore rupees as of FY23. This indicates the cumulative amount of profits that Maruti Suzuki has retained and reinvested into its operations over the years. These reserves bolster the company’s equity base, enhancing its ability to fund capital expenditures, research and development activities, and strategic investments without relying heavily on external financing. Additionally, reserves in equity capital reflect the company’s profitability and its commitment to creating long-term value for shareholders by prudently reinvesting earnings into the business.
You can view the Reserves on Radar under Equity Capital in the Balance Sheet section.