Retained Earnings

What is Retained Earnings?

Retained earnings are the cumulative net income of a company that is kept for reinvestment in the business rather than being paid out as dividends. They are recorded under the shareholders’ equity section of the balance sheet.

Why It Matters

• They represent a source of internal funding for future projects, debt repayment, or asset purchases.

• A consistent increase in retained earnings indicates a healthy, growing company.

• They show the portion of profits that the company has chosen to “plow back” into its operations over time.