Retained earnings are the amount of profit a company has left over after paying all its direct costs, indirect costs, income taxes and its dividends to shareholders.
Companies often reinvest their retained earnings in the business, as working capital or to pay for new equipment, research and development or marketing activities. When accumulated year after year, retained earnings are known as “accumulated profits.”
More about retained earnings
Retained earnings are calculated in a business’ income statement—as shown below—and they also appear in the shareholders’ equity category of the balance sheet.