The percentage of net earnings not paid out as dividends, 
but retained by the company to be reinvested in its core 
business or to pay debt. It is recorded under shareholders' 
equity on the balance sheet. 

The formula calculates retained earnings by adding net 
income to (or subtracting any net losses from) beginning 
retained earnings and subtracting any dividends paid to 
shareholders:


Retained Earnings=Beginning Balance of Retained 
Earnings+net income-Dividends paid out to shareholders.


Also known as the "retention ratio" or "retained surplus".

In most cases, companies retain their earnings in order to 
invest them into areas where the company can create growth 
opportunities, such as buying new machinery or spending the 
money on more research and development.

Should a net loss be greater than beginning retained 
earnings, retained earnings can become negative, creating a 
deficit.