Retained Earnings

Earnings the company has accummulated since its inception not paid out as dividends but instead reinvested in the business or used to pay off debt. Also called earned surplus or accumulated earnings or unappropriated profit.

If a company has had a loss greater than beginning retained earnings, retained earnings will become negative, creating a deficit.

Learn how to analyze a balance sheet in terms of company's liquidity and solvency using financial ratios such as the current ratio, quick (or acid) ratio, debt to asset ratio and debt to equity ratio.