Retained Earnings

Motley Fool  Oct 10  Comment 
Here's how to use the income statement and balance sheet to find out how much a company paid out in dividends.
Motley Fool  May 22  Comment 
Retained earnings is basically how much of net earnings a company retains to spend on the business, after paying dividends to shareholders. It's an important measure to understanding how a business operates. After all, it's still your money. Is...
Wall Street Journal  Nov 11  Comment 
Swift Energy said it would restate its financial results for recent years after an error with a write-down model led the oil-and-gas producer to understate its 2013 retained earnings by about $30 million.
The Economic Times  Sep 1  Comment 
With the latest changes, requirement to adjust difference directly to opening balance of retained earnings has now been made optional.
SeekingAlpha  Aug 11  Comment 
By Michael Ide Citigroup Inc. (NYSE:C) and Bank of America Corp. (NYSE:BAC) have managed a neat trick since the beginning of the year, increasing their regulatory capital faster than retained earnings during H1'14. While this puts the banks in a...
SeekingAlpha  Aug 8  Comment 
By Prudent Research: Very Weak Guidance for Q3 SolarCity (NASDAQ:SCTY) reported its earnings after-hours. Although it reported an increase in MW booked of 218 MW, which is up 216% when compared to Q2 of 2013, it also projected a significant...
The Hindu Business Line  Feb 10  Comment 
‘Retained earnings cannot be used only for dividends, staff benefits’  Jul 2  Comment 
An anticipated writedown of US$4.5-billion to US$5.5-billion on the bungled Pascua-Lama project would eliminate the US$3.9-billion in retained profits that the gold giant reported at the end of the first quarter
Commodity Online  Mar 19  Comment 
Let's extend this further. Companies can get gold loans instead of paper money loans. With a paper loan, the financier will require the company to hedge some of its gold forward to ensure that the loan is repaid. If the company banked it in gold,...


Retained Earnings is the portion of net income that the company does not distribute to its shareholders as dividends

Retained earnings appear on a company's balance sheet and are accumulated from one year to the next. When accumulated retained earnings is negative, it is called retained losses (also known as accumulated losses, or accumulated deficit). Retained earnings are calculated by adding net income and subtracting dividends from last year's retained earnings.

Ending retained earnings = Beginning retained earnings + net income - dividends

When looked at in conjunction with net income, retained earnings is used as an indicator of the company's priorities vis-a-vis paying its shareholders or bringing that money with it into its next fiscal period.

Fluctuations in retained earnings may be an indicator of a company's expectations for upcoming fiscal period: if a company's retained earnings increase dramatically one year or quarter, it may be indicative of a pessimistic outlook for the upcoming fiscal period. By contrast, if retained earnings decrease, the company is paying its shareholders a hefty dividend and is therefore likely optimistic about future earnings.


Suppose a company begins business on 20X1 and has net income of $50 million. It does not pay any dividends. Then its retained earnings for the year would be $50 million (0+50-0). In 20X2, the company earns $40 million and pays $10 million in dividends. Its retained earnings for the end of the year would be $80 million (50+40-10). In 20X3, the company makes a loss of $100 million and pays no dividends; at the end of 20X3, the company's accumulated deficit (since retained earnings is negative) would be $20 million (80-100).


The retained earnings account on the balance sheet is said to represent an "accumulation of earnings" since net profits and losses are added/subtracted from the account from period to period.

The general equation can be expressed as following:

Ending Retained Earnings = Beginning Retained Earnings - Dividends Paid + Net Income

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