Retained earnings

The accumulated total of every profit the business has ever made and not paid out to its owners, carried on the balance sheet inside equity.

Example

Northgate's retained earnings rose from 1,160,000 to 1,505,000 - exactly the 345,000 net profit, with nothing distributed.

Important

This is where the income statement lands on the balance sheet. If the movement does not equal profit less distributions, find out why before reading anything else.

Related terms

• Shareholders' equity — What is left for the owners once every liability is subtracted from every asset. Usually made up of the capital owners put in plus the profits the business has kept.
• Net profit — What remains after every cost, including interest and tax, has been subtracted from revenue. The bottom line of the income statement.
• Balance sheet — A statement of everything a business owns and everything it owes at one specific moment. What is left after subtracting the second from the first belongs to the owners.

Lessons that explain it

• The balance sheet: what it owns and what it owes — A photograph taken on one specific day, showing what the business has, who has a claim on it, and what is left over for the owners. It is the statement that tells you whether a bad year is survivable. (13 min)

All 578 terms in the Investing glossary