Finance Dictionary
Retained Earnings
Definition
The amount of net income left over for the business after it has paid out dividends to its shareholders.
Deep Dive
Retained earnings represent the portion of a company's cumulative net earnings or profits that are not distributed as dividends to shareholders but are instead kept and reinvested in the business. This figure is a critical component of shareholder equity on a company's balance sheet and reflects the amount of profit that has been accumulated over time after all expenses and dividend payouts have been accounted for. It's a key indicator of a company's financial strength and its ability to generate profits that it can then reinvest in its own growth.
Examples & Use Cases
- 1Apple using billions in retained earnings to fund the development of new products like the Vision Pro headset and expand its service offerings.
- 2A manufacturing company using its retained earnings to purchase advanced robotics, improving efficiency and expanding production capacity.
Related Terms
Net IncomeDividendsShareholder Equity