My shop launched on 2/1/2016 so I've been going for only 1.5 years. Because it's a thing I do in my spare time, and in partnership with a very risk averse husband, it's been slow going. I'm okay with that, though. My sales volume is slowly growing and I'm keeping a tight rein on expenses, so I should be consistently profitable next year hopefully. I track my numbers month to month since inception and the overall trend is upward.
So my question is this: I only check my balance sheet twice a year. It's now showing retained earnings at negative $4000 (not exactly, but I rounded it off for this discussion). I googled what retained earnings are so I know that when they're negative it can mean:
a. sustained losses (this is what my situation is)
or
b. too much money taken out of the business as stock distributions (or borrowing and then disbursing those funds to stockholders)
Since my case is A, if I continue my growth pattern and get the thing into sustained profitability, will that negative number slowly shrink and eventually turn positive? It seems logical that it will, but I want to ask someone and make my understanding is right.
So my question is this: I only check my balance sheet twice a year. It's now showing retained earnings at negative $4000 (not exactly, but I rounded it off for this discussion). I googled what retained earnings are so I know that when they're negative it can mean:
a. sustained losses (this is what my situation is)
or
b. too much money taken out of the business as stock distributions (or borrowing and then disbursing those funds to stockholders)
Since my case is A, if I continue my growth pattern and get the thing into sustained profitability, will that negative number slowly shrink and eventually turn positive? It seems logical that it will, but I want to ask someone and make my understanding is right.
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