Retained Earnings Calculator

Formula

The formula to calculate the Retained Earnings (RE) is:

\[ RE = BP + \text{Net Income (Profit or Loss)} - C - S \]

Where:

$ RE $ is the Retained Earnings ($).
$ BP $ is the Beginning Period Retained Earnings ($).
$ C $ is the Cash Dividends ($).
$ S $ is the Stock Dividends ($).

What are Retained Earnings?

Retained earnings are the total earnings of a business, including beginning retained earnings and net income, minus the cash and stock dividends. It’s one metric used by businesses to understand how successful they are without investments, as investments are usually independent of how a business is operating.

Example Calculation

Consider an example where:

Beginning Period Retained Earnings (BP): $50,000
Net Income (Profit or Loss): $20,000
Cash Dividends (C): $5,000
Stock Dividends (S): $2,000

Using the formula to calculate the Retained Earnings:

\[ RE = 50000 + 20000 - 5000 - 2000 = 63000 \text{ dollars} \]

This means that the retained earnings for this example are $63,000.