How to Calculate Retained Earnings (With Formula, Example & Calculator)

Wondering how much profit your company has kept after paying out dividends? That’s what retained earnings are all about!

Retained earnings are like your business’s savings account—profits that you didn’t distribute to shareholders, but instead reinvested back into the company.

Let’s break it down in a fun and simple way, and yes—there’s a free calculator ✨

🔢 Want to skip the math?
Just enter your beginning retained earnings, net income, and dividends—and we’ll calculate it for you.

🙋 What Are Retained Earnings?

Retained earnings represent the portion of a company’s net income that’s kept (retained) rather than paid out as dividends. It’s a snapshot of how much profit the company has accumulated over time.

It’s an important figure because it shows how well the business is reinvesting its profits to grow.

🧮 Retained Earnings Formula

Here’s the formula used by businesses and accountants:

Retained Earnings = Beginning Retained Earnings + Net Income − Dividends

Where:

• Beginning Retained Earnings is the balance at the start of the period
• Net Income is your company’s profit for the period
• Dividends are what you paid out to shareholders

✏️ Example: Retained Earnings Calculation

Let’s say your company had:

• Beginning Retained Earnings: $50,000
• Net Income this year: $30,000
• Dividends paid: $10,000

Then the retained earnings would be:

Retained Earnings = 50,000 + 30,000 − 10,000 = $70,000

✅ Your company now has $70,000 in retained earnings.

📌 Why Are Retained Earnings Important?

• Shows how much profit is being reinvested
• Indicates business sustainability and growth potential
• Helps assess dividend policies
• Appears on your balance sheet under shareholders’ equity

💵 Tips for Managing Retained Earnings

• Reinvest wisely into high-impact projects
• Track it regularly to measure business health
• Avoid overpaying dividends if growth is your goal