Retained Earnings

What Does Retained Earnings Mean?

A company’s retained earnings represent its net income accumulated since it began operations, excluding any funds distributed as dividends. Retained earnings include only those funds reinvested into the company, such as through the purchase of additional assets.

This is also referred to as earned surplus.

Insuranceopedia Explains Retained Earnings

To determine a company’s retained earnings, its net earnings are accumulated from its first year of operations up to the current fiscal year. From this total, any funds distributed as dividends are subtracted.

Retained earnings, or earned surplus, are typically used for purchasing additional assets or paying down debt. Analyzing retained earnings offers insight into the company’s approach to reinvestment, often reflecting its growth potential.