How Do I Calculate Retained Earnings Without a retained Earnings Without Beginning or Ending Retained Earnings?
Hey all, I'm building a proforma for a recently company created and I’m trying to figure out how to estimate retained earnings but I don’t have a beginning retained earnings balance, and the company doesn’t issue stock or pay dividends. Here’s what I have so far from my balance sheet over the last 3 years:
| Description | Year 1 | Year 2 | Year 3 |
|----------------------------|--------|--------|--------|
| Current Liabilities | 11,146 | 13,704 | 12,774 |
| Total Liabilities | 19,193 | 23,067 | 21,517 |
| Total Owner’s Equity | 21,351 | 19,797 | 21,426 |
| Total Liabilities + Equity | 40,544 | 42,864 | 42,943 |
| Net Earnings | 21,351 | -1,554 | 1,629 |
Additional context:
- Business was just created (so I assume retained earnings = $0 at the start)
- No dividends or capital raised
- No stock is issued
- Owners can withdraw money, but it doesn’t affect the business to pay its obligations (e.g. sole proprietorship)
- You’re bootstrapping and reinvesting everything
- 100% of profits get reinvested (into tech or operations)
- if in the future someone injects capital or equipment, we can include it as owner's equity
does retained earnings in this context is equal to net profit ?
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