What retained earnings are
Retained earnings are the profit a company keeps. They are not paid out as dividends. This tool finds the ending balance. You start with the beginning retained earnings. You add net income for the period. Then you subtract dividends paid.
Why retained earnings matter
Kept profit funds growth without new debt. It can buy equipment or pay down loans. Retained earnings show how much a firm reinvests. A rising balance signals steady profit. A falling one can flag trouble or big payouts. Investors watch the trend closely.
How to use this calculator
Enter three values. Add the beginning retained earnings in your currency. Enter the net income for the period. Then enter the dividends paid. The tool shows the ending retained earnings at once. Change any figure and it recomputes.
How it is calculated
The rule is a short sum. Ending = beginning + net income − dividends. You add the period profit to the old balance. Then you remove what was paid to owners. The result is the new balance. The order of the steps matters here.
A worked example
Say the beginning balance is five hundred thousand. Net income adds one hundred twenty thousand. Dividends take out forty thousand. Add and subtract in order. The ending balance is five hundred eighty thousand. That sum carries straight into next period.
The role of net income
Net income is profit after all costs and tax. A loss enters as a negative number. That would lower the ending balance. Use the figure from the income statement. It must match the same period as the rest. A mismatch quietly distorts the balance.
Reading the result
The ending balance carries into the next period. It becomes the new beginning figure. A larger balance means more kept profit. Compare it across years to see the trend. The direction matters more than one number. A steady climb is a healthy sign.
Common mistakes to avoid
One slip is adding dividends instead of subtracting. Another is using profit before tax. People also mismatch the periods. Each error breaks the ending retained earnings. Enter clean, matched figures. One wrong sign flips the whole result.
The limits of this tool
This calculator does the basic roll forward. It does not adjust for accounting changes. It cannot split stock and cash dividends. It also ignores prior-period corrections. Use it for the core balance only. Adjust for special items on your own.
Retained earnings versus cash
Kept profit is not the same as cash. Retained earnings sit in equity, not the bank. The money may already be in assets. A high balance does not promise free cash. Read it beside the cash flow statement. Profit on paper is not money in hand.
A final tip
Tie each input to the same reporting period. Keep the prior balance and payouts on file. Roll the figure forward each period in order. A clean balance keeps the equity story clear.