Retained Earnings

What is Retained Earnings?

Retained earnings represent the total net income a company has kept (retained) over time after paying out dividends to shareholders. Instead of being distributed, this portion of profits is reinvested into the business for growth, debt repayment, or other needs. Retained earnings accumulate year after year and are shown under shareholders’ equity on the balance sheet.

Formula:
Retained earnings = Beginning retained earnings + Net income – Dividends paid