Retained Earnings Calculator
From the beginning retained earnings, net income and dividends, compute the ending retained earnings.
Input Data
Results
At a glance:Retained earnings are cumulative profits kept in the company. Ending retained earnings = beginning retained earnings + net income − dividends paid. A loss reduces the balance; dividends also reduce it.
Formula
Ending retained earnings = beginning retained earnings + net income − dividends paid.
How to Use
- Enter the beginning retained earnings.
- Enter the period net income and dividends paid.
- Read the ending retained earnings.
FAQ
Is retained earnings the same as the company's cash?
No. Retained earnings are a cumulative equity concept — accumulated past profits not paid out as dividends. Those profits may already be tied up in plant, inventory, receivables or debt repayment, not sitting idle as cash. A firm with large retained earnings may have little cash. For actual usable funds, look at cash and equivalents and the cash-flow statement, not retained earnings.
Can retained earnings be negative?
Yes. If a company runs losses for years, cumulative losses exceed past retained profits and the balance turns negative — usually called an accumulated deficit. Negative retained earnings are common in start-ups or cash-burning expansion phases. A negative figure is not automatically a crisis, but read it together with cash flow, financing ability and the path to profitability.
Should a company pay more dividends or retain more earnings?
It depends on reinvestment returns and shareholder preference. If the firm can reinvest at returns above shareholders' required return, retaining earnings benefits shareholders; if no such opportunities exist, paying profits out as dividends may be better. Mature, stable firms tend to pay higher dividends; high-growth firms often retain all earnings to fund expansion.
How do retained earnings differ from equity and paid-in capital?
All three sit under shareholders' equity but come from different sources. Paid-in capital (share capital + share premium) is what shareholders originally put in. Retained earnings are cumulative profits 'earned and kept' since inception. Total equity is the sum (plus other comprehensive income, treasury shares, etc.) representing shareholders' claim on net assets. Simply: paid-in capital is money shareholders put in; retained earnings is money the company earned and kept.
Does a stock dividend (bonus shares) affect retained earnings?
Yes. A stock dividend reduces retained earnings but, unlike a cash dividend, does not pay out cash or reduce total equity — it transfers an amount from retained earnings to share capital (and premium), moving value between equity sub-accounts while total equity and cash stay unchanged. A stock split is even simpler, mainly adjusting share count and par value without touching retained earnings. Enter the retained-earnings amount transferred if you want to reflect a stock dividend precisely.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.