Retained Earnings Calculator

Calculate your company's ending retained earnings for any period.

Enter your beginning retained earnings, net income, dividends paid, and optional growth rates to see your ending retained earnings. Supports multi-period calculations and detailed breakdown.

Retained Earnings Examples

See how retained earnings are calculated in different scenarios.

Single Period, No Growth

Basic

Calculate ending retained earnings for one period with no growth.

Beginning Retained Earnings: 10000 USD

Net Income: 5000 USD

Dividends Paid: 2000 USD

Number of Periods: 1

Net Income Growth Rate (%): undefined%

Dividends Growth Rate (%): undefined%

Multi-Period, No Growth

Multi-Period

Calculate retained earnings over 3 periods with constant net income and dividends.

Beginning Retained Earnings: 15000 USD

Net Income: 4000 USD

Dividends Paid: 1000 USD

Number of Periods: 3

Net Income Growth Rate (%): undefined%

Dividends Growth Rate (%): undefined%

Multi-Period with Net Income Growth

Growth (Net Income)

Calculate retained earnings over 2 periods with 10% annual net income growth.

Beginning Retained Earnings: 20000 USD

Net Income: 6000 USD

Dividends Paid: 2500 USD

Number of Periods: 2

Net Income Growth Rate (%): 10%

Dividends Growth Rate (%): undefined%

Multi-Period with Dividends Growth

Growth (Dividends)

Calculate retained earnings over 2 periods with 5% annual dividends growth.

Beginning Retained Earnings: 12000 USD

Net Income: 3500 USD

Dividends Paid: 1000 USD

Number of Periods: 2

Net Income Growth Rate (%): undefined%

Dividends Growth Rate (%): 5%

Other Titles
Understanding Retained Earnings: A Comprehensive Guide
Everything you need to know about retained earnings, calculation methods, and real-world applications.

What Are Retained Earnings?

  • Definition and Importance
  • Role in Financial Statements
  • Impact on Shareholder Equity
Retained earnings represent the cumulative net income of a company that is retained, rather than distributed as dividends to shareholders. They are a key indicator of a company's financial health and growth potential.
Retained Earnings in the Balance Sheet
On the balance sheet, retained earnings are reported under shareholder equity. They reflect the portion of profits reinvested in the business.

Practical Examples

  • A company with high retained earnings can fund expansion without external financing.
  • Retained earnings can be used for R&D, debt repayment, or acquisitions.

Step-by-Step Guide to Using the Retained Earnings Calculator

  • Input Required Data
  • Understand the Calculation
  • Interpret the Results
To use the calculator, enter your beginning retained earnings, net income, and dividends paid. For multi-period analysis, specify the number of periods and optional growth rates.
Calculation Formula
Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends Paid. For multiple periods, the formula is applied iteratively.

Step-by-Step Examples

  • If you start with $10,000, earn $5,000, and pay $2,000 in dividends, your ending retained earnings are $13,000.
  • With 10% net income growth, future periods will show higher retained earnings.

Real-World Applications of Retained Earnings

  • Business Growth Planning
  • Investor Analysis
  • Financial Reporting
Retained earnings are crucial for business growth, as they provide internal funding for expansion, research, and development.
Investor Perspective
Investors analyze retained earnings to assess a company's profitability and dividend policy.

Application Examples

  • A company with growing retained earnings is often seen as financially stable.
  • Retained earnings can signal management's confidence in future growth.

Common Misconceptions and Correct Methods

  • Retained Earnings vs. Cash
  • Dividends and Retained Earnings
  • Multi-Period Calculations
Retained earnings are not the same as cash. They represent profits kept in the business, which may be invested in assets or used to pay down debt.
Dividends Impact
Paying dividends reduces retained earnings, but not all profits are distributed as dividends.

Misconception Examples

  • A company can have high retained earnings but low cash if funds are invested in assets.
  • Retained earnings can be negative if cumulative losses exceed profits.

Mathematical Derivation and Examples

  • Basic Formula
  • Multi-Period Example
  • Growth Rate Adjustments
The basic formula for retained earnings is: Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends Paid.
Multi-Period Calculation
For each period: Ending = Beginning + Net Income - Dividends. Growth rates are applied to net income and dividends for each subsequent period.

Mathematical Examples

  • Year 1: 10000 + 5000 - 2000 = 13000
  • Year 2 (with 10% net income growth): 13000 + 5500 - 2000 = 16500