What is the definition of a Retained Earnings?

Retained Earnings is an accounting concept that details the profit retained by the firm (i.e. not paid out as dividends) for reinvestment in business activities or debt payments.

The calculation for Retained Earnings is:

• Initial Retained Earnings + Net Income - Dividends

Retained Earnings show up on the balance sheet of a company under Shareholders Equity, and may also be called the 'Retention Ratio'.