IKAP

Retained Earnings

DEFINITION

A company’s cumulative earnings since its beginning, minus any dividends paid to stockholders. This number is reflected in the owner’s equity.

IMPORTANCE

An accurate accounting of this number can identify funds that can be used toward company growth, measure the company’s performance against its projected worth and demonstrate the company’s health to stockholders.

EXAMPLE

  • Cash used to pay debts or reinvest in the business