Retained Earnings Calculator
Calculate ending retained earnings by adding net income and subtracting dividends from beginning balance. Track accumulated profits reinvested in the business with interactive charts.
About This Calculator
The Retained Earnings Calculator helps business owners, financial analysts, accountants, and investors quickly determine the ending retained earnings balance for any accounting period. Retained earnings represent the cumulative net income that a company keeps after distributing dividends to shareholders — money that is reinvested into the business for growth, debt reduction, or future opportunities.
The calculation follows the standard accounting formula: Ending Retained Earnings = Beginning Retained Earnings + Net Income − Dividends Paid. The calculator also derives the net addition to retained earnings (Net Income − Dividends), the retention ratio (percentage of income retained), and the dividend payout ratio (percentage of income distributed). All results are accompanied by visual charts for easy analysis.
Regional Notes
India (IN): Indian companies report retained earnings under the "Reserves and Surplus" section of the balance sheet. Dividend distribution is subject to dividend distribution tax (DDT) for certain categories, and companies must comply with the Companies Act 2013 when declaring dividends.
United States (US): US corporations report retained earnings in the shareholders' equity section of the balance sheet. The SEC requires publicly traded companies to disclose retained earnings changes in the statement of retained earnings. Dividends are declared at the board's discretion and are not tax-deductible.
United Kingdom (UK): UK companies report retained earnings in the equity section under "Retained earnings" as part of the statement of changes in equity. Dividend payments must comply with the Companies Act 2006, ensuring they are paid only from distributable profits.
Frequently Asked Questions
What are retained earnings?
Retained earnings are the portion of a company's net income that is kept or retained by the company rather than distributed to shareholders as dividends. They represent accumulated profits reinvested in the business to fund growth, pay down debt, or build cash reserves.
How do you calculate retained earnings?
Retained earnings are calculated using the formula: Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends Paid. This shows how much profit the company has reinvested after distributing dividends to shareholders.
Can retained earnings be negative?
Yes, retained earnings can be negative. This is called an accumulated deficit and occurs when a company has accumulated more losses than profits over its lifetime, or when dividends distributed exceed the net income earned.
What is the difference between retained earnings and net income?
Net income is the profit earned in a single accounting period after all expenses and taxes are deducted. Retained earnings is the cumulative total of all net income (less dividends) since the company's inception, representing reinvested profits held by the company.
How does paying dividends affect retained earnings?
When a company pays dividends to shareholders, its retained earnings decrease by the amount of dividends paid. Dividends are distributions of profits, so they reduce the pool of earnings that the company retains for reinvestment.
What is a good retained earnings amount?
There is no universal benchmark for retained earnings. Growing companies typically retain more earnings to fund expansion, while mature companies may distribute more dividends. A steady increase in retained earnings over time generally signals financial health and profitable operations.
What is the retention ratio?
The retention ratio (also called plowback ratio) is the percentage of net income retained by the company rather than paid as dividends. It is calculated as (Net Income - Dividends) / Net Income. A higher retention ratio means the company reinvests more of its profits into the business.
Are retained earnings the same as cash?
No, retained earnings are not the same as cash. Retained earnings are an accounting equity account that represents accumulated profits reinvested in the business. The cash may have been used to purchase assets, pay liabilities, or fund operations. Retained earnings do not equal available cash.