About Retained Earnings Calculator (Formula)
A Retained Earnings Calculator is a financial tool used to calculate the retained earnings of a company, which represents the portion of net earnings or profit that is retained and reinvested in the business rather than distributed to shareholders as dividends. Retained earnings are an important financial metric that reflects a company’s cumulative profits and losses over time. The formula for calculating retained earnings (RE) is as follows:
Retained Earnings (RE) = Beginning Retained Earnings (BRE) + Net Income (NI) – Dividends Paid (DP)
Where:
- Retained Earnings (RE) is the retained earnings at the end of the accounting period, which can be found on the company’s balance sheet.
- Beginning Retained Earnings (BRE) is the retained earnings from the previous accounting period, often the end of the previous fiscal year.
- Net Income (NI) represents the company’s total earnings or profit for the current accounting period, typically found on the income statement.
- Dividends Paid (DP) is the total amount of dividends distributed to shareholders during the current accounting period.
The retained earnings formula reflects the change in the company’s retained earnings balance over a specific period, such as a fiscal year. Beginning retained earnings are carried forward from the previous period, and then net income is added while dividends paid are subtracted to arrive at the ending retained earnings.
Retained Earnings Calculators are used by businesses and financial professionals to track the accumulation of earnings over time, which is crucial for financial planning and decision-making. Retained earnings are often reinvested in the company for various purposes, such as business expansion, debt reduction, or future investments, and they play a key role in assessing a company’s financial health and stability.