Retained earnings are the cumulative net earnings or profit of a company after paying dividends. Retained earnings are the net earnings after dividends that are available for reinvestment back into the company or to pay down debt. Since retained earnings represent a company's remainder of earnings that are not paid out in dividends, they are often referred to as retained surplus.
The statement of retained earnings is one of the financial statements that publicly traded companies are required to publish, at least, on an annual basis.
Retained earnings = Beginning retained earnings + Net income - Dividends
The retained earnings statement shows the surplus, or retained profit, between accounting periods. The statement also delineates changes in net income over a given period, which may be as often as every three months, but must be produced annually. Since the statement of retained earnings is such a short statement, it can be listed sometimes at the bottom of the income statement after net income.
Investors pay close attention to retained earnings, since the account shows how much money is available to be reinvested back in the company and how much is available to pay dividends to shareholders.