retained earnings

Retained Earnings

The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet.

Calculated by adding net income to (or subtracting any net losses from) beginning retained earnings and subtracting any dividends paid to shareholders.

Investopedia Commentary

Should a net loss be greater than beginning retained earnings, then retained earnings can become negative, creating a deficit.

Also known as the retention ratio or retained surplus.

Related Links

Evaluating Retained Earnings: What Gets Kept Counts

See also: Balance Sheet, Dividend, Income Statement, Retention Ratio

retained earnings

The accumulated net income that has been retained for reinvestment in the business rather than being paid out in dividends to stockholders. Net income that is retained in the business can be used to acquire additional income-earning assets that result in increased income in future years. Retained earnings is a part of the owners' equity section of a firm's balance sheet. Also called earned surplus, surplus, undistributed profits. See also accumulated earnings tax, restricted retained earnings, statement of retained earnings.