- Retained earnings
accounting, retained earnings refers to the portion of net incomewhich is retained by the corporation rather than distributed to its owners as dividends. Similarly, if the corporation makes a loss, then that loss is retained and called variously retained losses, accumulated losses or accumulated deficit. Retained earnings and losses are cumulative from year to year with losses offsetting earnings.
Retained earnings are reported in the
shareholders' equitysection of the balance sheet. Companies with net accumulated losses may refer to negative shareholders' equity as a shareholders' deficit. A complete report of the retained earnings or retained losses is presented in the Statement of retained earningsor Statement of retained losses.
When total assets are greater than total liabilities, stockholders have a positive equity (positive
book value). Conversely, when total liabilities are greater than total assets, stockholders have a negative stockholders' equity (negative book value) — also sometimes called stockholders' deficit. A stockholders' deficit does not mean that stockholders owe money to the corporation as they own only its net assets and are not accountable for its liabilities. It means that the value of the assets of the company must rise above its liabilities before the stockholders hold positive equity value in the company.
The decision of whether a firm should retain net income or have it paid out as
dividendsdepends on several factors including, but not limited to the:
taxtreatment of dividends; and
*The funds required for reinvestment in the corporation is called Retention.
Dividend payout ratio
Statement of retained earnings
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Look at other dictionaries:
retained earnings — Earnings of a corporation from the current as well as prior years that have neither been distributed to the shareholders as dividends nor transferred to the surplus account. Corporate earnings accumulated over time. One of a corporation s equity… … Financial and business terms
retained earnings — n pl: earned surplus at surplus Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 … Law dictionary
retained earnings — retained profits; = ploughed back profits; = retentions The net profit available for distribution, less any distributions made, i.e. the amount kept within the company. Retained earnings are recorded in the profit and loss reserve … Accounting dictionary
retained earnings — retained profits; ploughed back profits; retentions The net profit available for distribution, less any distributions made, i. e. the amount kept within the company. Retained earnings are recorded in the profit and loss reserve … Big dictionary of business and management
Retained earnings — Accounting earnings that are retained by the firm for reinvestment in its operations; earnings that are not paid out as dividends. The New York Times Financial Glossary * * * retained earnings retained earnings ➔ earnings * * * Earnings not… … Financial and business terms
Retained Earnings — The percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. The formula calculates retained earnings by … Investment dictionary
retained earnings — An account on the balance sheet which represents the accumulated earnings of a corporation less any dividend distributions (including capitalization through stock dividends). It is usually a credit balance and a component of stockholder s equity … Black's law dictionary
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retained earnings — Accumulated *net income recorded as *stockholders’ *equity in a corporation’s *balance sheet. Retained earnings are normally available for distribution as *dividends … Auditor's dictionary
retained earnings — the accumulated, undistributed earnings of a corporation. Also called retained income, earned surplus. * * * … Universalium