Retained Earnings
The cumulative net income a company has kept rather than distributed to shareholders as dividends.
What is Retained Earnings?
Retained earnings represent the total accumulated profits a company has kept since its inception, after subtracting all dividends paid to shareholders. They appear in the equity section of the balance sheet and grow each period by net income and shrink by dividends or share repurchases that exceed earnings. Retained earnings are the primary funding source for internal reinvestment — a company with high retained earnings can finance growth, R&D, or acquisitions without issuing new stock or debt. A negative retained earnings balance (called an accumulated deficit) is common for young, unprofitable companies or those that have returned more than they've earned. Retention ratio and payout ratio together sum to 100% of net income.
Example
Apple's retained earnings turned deeply negative (approximately –$214 billion as of FY2024) despite being one of the world's most profitable companies — reflecting decades of aggressive share buybacks and dividends that together exceeded cumulative earnings, a deliberate capital return strategy.