Question

when do retained earnings increase?
during periods of negative net income
every period that there is a positive net income
when dividends are extracted from the business

Explanation:

Retained earnings represent accumulated profits not distributed as dividends. The formula for retained earnings change is: $\text{Ending Retained Earnings} = \text{Beginning Retained Earnings} + \text{Net Income} - \text{Dividends}$. Positive net income adds to retained earnings (assuming dividends don’t exceed net income), while negative net income or dividends decrease it. Thus, positive net income periods increase retained earnings.

Answer:

every period that there is a positive net income