What is Retained Earnings?
Retained Earnings Calculator: Retained earnings are the portion of a company's profit that is held or retained for reinvestment in the company rather than being paid out as dividends to shareholders. Retained earnings can be used to pay down debt, invest in assets, or fund future growth projects.
Calculate Your Retained Earnings
| Enter Earnings | |
|---|---|
| Enter Dividend Payout Ratio (%) | |
| Enter Number of Shares Outstanding |
Results:
| Dividends Distributed | |
|---|---|
| Retained Earnings | |
| Retained Earnings per Share |
Formula:
Dividends distributed = Earnings × Dividend Payout Ratio
Retained earnings = Earnings - Dividends distributed
Retained earnings per share = Retained earnings / Number of shares outstanding
FAQ
1. What is Retained Earnings?
Retained earnings refer to the portion of a company's profits that are not distributed as dividends but are retained for reinvestment into the business. These retained profits are used for business expansion, paying down debt, or improving financial health.
2. How is Retained Earnings calculated?
Retained earnings are calculated using the formula: Retained Earnings = Earnings - Dividends. This calculation helps companies determine how much profit has been reinvested in the business after paying dividends to shareholders.
3. Why are Retained Earnings important?
Retained earnings are important because they represent the funds that a company has for future growth. These earnings can be used for research and development, debt reduction, or to fund expansion projects. It also indicates the company's profitability and financial health.
4. Can Retained Earnings be negative?
Yes, retained earnings can be negative. This typically occurs when a company has accumulated more losses than profits over time, resulting in a deficit. Negative retained earnings can be a red flag to investors and creditors about the company's financial stability.
5. What is the difference between retained earnings and dividends?
Dividends are the portion of a company's profits distributed to shareholders, while retained earnings refer to the profits that remain in the company for reinvestment or debt reduction. Essentially, dividends are paid out to shareholders, whereas retained earnings are kept for future growth.