Retained Earnings
Accumulated profits not distributed to shareholders, representing internally generated capital reinvested in the business to fund growth and operations.
Retained Earnings
The cumulative net income of a corporation that has been retained in the business rather than distributed to shareholders as dividends, representing internally generated equity capital.
For instance, a profitable technology company might have retained earnings of $500 million after 10 years of operations, having generated $700 million in cumulative profits while distributing $200 million in dividends over that period.
Retained earnings appear in the shareholders’ equity section of the balance sheet, increasing with net income and decreasing with net losses and dividend declarations. This account represents a company’s ability to self-finance growth through profitable operations, reducing reliance on external debt or equity financing.