Retained earnings are the cumulative profits a company has kept to reinvest rather than pay out. Negative retained earnings (an accumulated deficit) are common for young, loss-making companies.
How to use the Retained Earnings Calculator
- Beginning retained earnings
- Net income (or loss)
- Cash dividends
- Stock dividends
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter beginning retained earnings, net income and dividends paid.
Inputs explained
| Field | What to enter |
|---|---|
| Beginning retained earnings | Amount in your currency |
| Net income (or loss) | Amount in your currency |
| Cash dividends | Amount in your currency |
| Stock dividends | Amount in your currency |
What each result means
- Ending retained earnings = [Beginning retained earnings] + [Net income (or loss)] – [Cash dividends] – [Stock dividends]
- Retention ratio = ([Net income (or loss)] – [Cash dividends] – [Stock dividends])÷[Net income (or loss)]×100
- Payout ratio = ([Cash dividends] + [Stock dividends])÷[Net income (or loss)]×100
Example values
How the main result changes when Beginning retained earnings changes and everything else stays at the example values above:
| Beginning retained earnings | Ending retained earnings |
|---|---|
| 600,000 | 850,000 |
| 900,000 | 1,150,000 |
| 1,200,000 | 1,450,000 |
| 1,500,000 | 1,750,000 |
| 1,800,000 | 2,050,000 |
| 2,400,000 | 2,650,000 |
Formula
Ending retained earnings = beginning retained earnings + net income − cash dividends − stock dividends
Retention ratio = (net income − dividends) ÷ net income
Worked example
Inputs: Beginning retained earnings: $1,200,000; Net income (or loss): $350,000; Cash dividends: $100,000; Stock dividends: $0.
Results: Ending retained earnings = $1,450,000.00; Retention ratio = 71.43 %; Payout ratio = 28.57 %.
Frequently asked questions
What are retained earnings?
Accumulated profits kept in the business rather than paid as dividends.
Are retained earnings cash?
No. They're part of equity and may be invested in assets.
Can retained earnings be negative?
Yes, that's an accumulated deficit.