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 ?
Repellat dolore modi officia autem ab et. Dolores reiciendis sunt sequi fugit nihil dicta. Dolorem libero eaque velit.
Illum aut magnam rem optio voluptatem iure et. Odit aut sit ipsa accusantium aut. Odio quia incidunt error rem odit.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...