Retained earnings
Financial Accounting glossary · Stockholders' Equity
Definition
Cumulative net income less cumulative dividends; an equity component.
Retained earnings in plain English
Retained earnings is the running total of all the profit a company has ever made but chosen to KEEP inside the business instead of handing out to its owners. Each year you add that year's profit and subtract any dividends (the slice paid out to shareholders); what's left piles up here. Think of it like a piggy bank of past profits the company reinvests to grow itself. It sits in the "equity" section — the part of the books that shows what the owners actually own — because this saved-up money belongs to them, it's just being put to work rather than paid out.
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