Retained earnings - Definition and Overview

In accounting, retained earnings are profits that were not paid to a company's shareholders as dividends.

They are reported in the ownership equity section of a firm's balance sheet. The decision of whether a firm should retain profits or disburse them as dividends depends on at least two things: the firm's judgement of its own investment opportunities relative to those available in the market and any difference in tax treatment of dividends paid now and capital gains expected to result from investing retained earnings.

Example Usage of Retained