💰 Retained Earnings Calculator
Calculate retained earnings
Optional - dividends paid to shareholders
How to Use This Calculator
Enter Beginning Retained Earnings
Input the beginning retained earnings - the retained earnings balance at the start of the period from the balance sheet.
Enter Net Income
Enter the net income for the period - profit after all expenses and taxes from the income statement.
Enter Dividends Paid (Optional)
Optionally enter dividends paid to shareholders during the period. If omitted, defaults to 0.
Review Ending Retained Earnings
See the ending retained earnings - beginning retained earnings plus net income minus dividends. This represents cumulative profits retained in the business.
Formula
Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends
Example Calculation:
If beginning retained earnings $50,000, net income $30,000, dividends $10,000:
• Ending retained earnings = $50,000 + $30,000 - $10,000 = $70,000
• This represents cumulative profits retained in the business
About Retained Earnings Calculator
A retained earnings calculator helps you calculate the retained earnings balance, which represents cumulative profits retained in the business. Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends. Retained earnings are profits that are kept in the business rather than distributed to shareholders as dividends. Retained earnings are an important source of internal financing and represent the portion of net income that remains in the business for growth and investment. Understanding retained earnings helps assess financial health and growth capacity.
When to Use This Calculator
- Financial Analysis: Calculate retained earnings for financial statements
- Balance Sheet: Calculate retained earnings for balance sheet
- Growth Planning: Assess retained earnings for growth
- Dividend Planning: Plan dividend payments
Understanding Retained Earnings
- Cumulative Profits: Cumulative profits retained in the business
- Internal Financing: Source of internal financing for growth
- Growth Capacity: Indicates capacity for growth and investment
- Shareholder Equity: Part of shareholder equity on balance sheet
Why Use Our Calculator?
- ✅ Financial Analysis: Calculate retained earnings accurately
- ✅ Balance Sheet: Calculate retained earnings for balance sheet
- ✅ Growth Planning: Assess growth capacity
- ✅ Dividend Planning: Plan dividend payments
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What are retained earnings?
Retained earnings represent cumulative profits retained in the business rather than distributed to shareholders as dividends. Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends. Retained earnings are an important source of internal financing and represent the portion of net income that remains in the business for growth and investment. Retained earnings are part of shareholder equity on the balance sheet. Understanding retained earnings helps assess financial health and growth capacity.
Why are retained earnings important?
Retained earnings are important because they: (1) Internal financing - provide source of internal financing for growth, (2) Growth capacity - indicate capacity for growth and investment, (3) Financial health - show financial health and profitability over time, (4) Dividend policy - reflect dividend policy and reinvestment strategy, (5) Shareholder equity - are part of shareholder equity. Higher retained earnings indicate more internal financing available for growth, while lower retained earnings may indicate higher dividend payments or losses.
Can retained earnings be negative?
Yes, retained earnings can be negative, which is called accumulated deficit. Negative retained earnings occur when cumulative losses exceed cumulative profits and dividends. This indicates the business has lost money over time or paid more in dividends than earned. Negative retained earnings reduce shareholder equity and may indicate financial distress. However, negative retained earnings don't necessarily mean the business is failing - it depends on current profitability and prospects.
How do retained earnings relate to dividends?
Retained earnings and dividends are related: (1) Retained earnings = Profits - Dividends - profits kept in the business, (2) Dividends = Profits - Retained earnings - profits distributed to shareholders, (3) Trade-off - more dividends means less retained earnings, (4) Dividend policy - reflects dividend policy and reinvestment strategy. Companies with high growth prospects often retain more earnings for investment, while mature companies may pay more dividends. The balance between dividends and retained earnings depends on growth needs and shareholder preferences.