Retained Earnings

What Does Retained Earnings Mean?

A company's retained earnings are its net income since the year it began operating. It excludes funds that are distributed as dividends and only factors in those that have been converted into reinvestments, such as the purchase of further assets.

It is also known as earned surplus.

Insuranceopedia Explains Retained Earnings

To determine a company's retained earnings, its net earnings are added up starting from the first year of operations up until the current fiscal year. Then, any of the funds used as dividends are subtracted from this sum.

Earned surplus goes to the purchasing of more asserts or debt payments. It is analyzed to get a sense of the business's attitude toward reinvestment, which is often an indicator of business growth.