What are retained earnings?

Retained earnings are the cumulative profits or losses a business has kept rather than distributing to owners or shareholders. Retained earnings are reported as part of equity on the balance sheet and reflect the portion of earnings that has been reinvested in the business over time.

Example: A company earns $100,000 in profit and distributes $20,000 in dividends, leaving $80,000 to increase retained earnings.

Related terms: Equity, Net Income, Dividends, Balance Sheet