Retained earnings
Definition · Level 10 · Valuation
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The running total of profit a company has kept instead of paying out as dividends. It grows each year by net income minus dividends and sits inside shareholders’ equity.
Example
Brewline: net income 105 − dividends 28 = 77 added to retained earnings.
Where Tradecraft teaches it
Level 10 · Valuation, in the lesson “The balance sheet: what a company owns and owes”: Assets = liabilities + equity, current items, working capital, goodwill and retained earnings.
Related terms
- AssetsResources a company owns or controls that should bring future benefit: cash, receivables, inventory, equipment, intangibles.
- Balance sheetA snapshot on one date of what a company owns, what it owes and the owners’ remaining claim, always satisfying assets = liabilities + equity.
- GoodwillThe premium an acquirer pays above the fair value of the target’s identifiable net assets, booked as an asset.
- LiabilitiesWhat a company owes others: payables, accrued expenses, deferred revenue, debt, leases.
- Shareholders’ equity (book value)Assets minus liabilities: the owners’ accounting claim on the company, made of the money paid in plus the profits kept, less shares bought back.
- Working capitalCurrent assets minus current liabilities (in practice: receivables + inventory − payables).