What Are Retained Earnings?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

Retained Earnings is an accounting concept that details the profit retained by the firm (i.e. not paid out as dividends) for reinvestment in business activities or debt payments. The calculation for Retained Earnings is:

  • Initial Retained Earnings + Net Income – Dividends

Retained Earnings show up on the balance sheet of a company under Shareholders Equity, and may also be called the 'Retention Ratio'.

To learn more about this concept and become a master at Financial Statement modeling, you should check out our FSM Modeling Course. Learn more here. 

Module 1: Getting Started

Module 2: Fundamental Concepts

Module 3: The Income Statement

Module 4: Working Capital

Module 5: PP&E and Intangibles

Module 6: The Cash Flow Statement

Module 7: Debt & Interest Schedule

Module 8: Finishing Your Model

Module 9: Bonus

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Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.