What Are Retained Earnings?

Retained earnings is money that has not been paid out as dividends, but has instead been held (retained) in the business. Typically, this money could then be re-invested in the business in some way, for example, by buying new equipment, training staff, buying or renting new premises, paying off debt, and so on.

If the money is just left in the company and nothing is done with it, you could refer to it as retained profit that has been kept in the company after all taxes, etc have been paid.

If a business makes a loss, that loss is retained and called retained losses, accumulated losses or accumulated deficit.

The decision as to whether a business should retain net income or have it paid out as dividends depends on several factors, for example:

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