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 they represent a company's remainder of earnings not paid out in dividends, they are often referred to as retained surplus.
Retained earnings appear on a company's balance sheet and may also be published as a separate financial statement. 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. Uncommonly, retained earnings may be listed on the income statement.
Retained Earnings=RE+NI−Dwhere:RE=beginning retained earningsNI=net incomeD=dividends
The statement also delineates changes in net income over a given period, which may be as often as every three months, but not less than annually. Since the statement of retained earnings is such a short statement, it sometimes appears 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 for reinvestment back in the company and how much is available to pay dividends to shareholders.