what are unappropriated retained earnings 
unappropriated retained earnings consist of any portion of a company s retained earnings that are not classified as appropriated retained earnings appropriated retained earnings are set aside by the board and are assigned to a specific purpose such as factory construction hiring new labor buying new equipment or marketing they will not be distributed to shareholders as dividend payments 1 unappropriated retained earnings can be passed on to shareholders in the form of dividend payments 2understanding unappropriated retained earningsunappropriated retained earnings help to determine the amount of dividends that will be paid to shareholders they are not directed towards a specific purpose by the board and therefore are available to be paid out as dividends the greater the unappropriated retained earnings the higher the dividend that can possibly be paid unappropriated retained earnings are divided among all of the outstanding shares of the company and paid as dividends according to a predetermined dividend payment schedule the level of unappropriated retained earnings can provide a certain amount of insight into a company for example if unappropriated retained earnings are increasing over time and are being paid out as dividends this can indicate that a company is performing better in that sales are up costs are static and earnings are not needed for business purposes on the other hand it could possibly indicate that management is not reinvesting in the company when it should be letting equipment age or not spending enough on marketing both of which could have adverse impacts down the road it s important to pay attention to where and how a company spends its earnings investopedia candra huffexample of unappropriated retained earningsfor the fiscal year end 2019 company xyz has retained earnings of 5 million currently the company s machinery is aged and out of date if the company invested in new state of the art equipment it could possibly lead to greater production and more efficiency in the future this would allow the company to remain competitive amongst its peers the company decides that it will need to spend 3 million on updating all of its equipment and the board approves that it should do so this 3 million would be classified as appropriated retained earnings as it will be allocated for a specific use buying equipment it is a decision made by management to reinvest in the company 1 the remainder of the retained earnings after accounting for the capital expenditure on equipment is 2 million 5 million 3 million 2 million this is the unappropriated retained earnings and this is the amount through which dividends will be paid out to shareholders based on the currently established dividend payment schedule 2