Retained Earnings Calculator
Enter your beginning retained earnings, net income, and either a fixed dividend amount or a dividend payout ratio. The calculator shows your ending retained earnings, dividends distributed, and retained earnings per share for the period. A 5-year projection schedule lets you see how the balance grows or shrinks under consistent assumptions.
What are retained earnings?
Retained earnings are the cumulative net income a company has kept rather than distributed to shareholders as dividends. They appear on the shareholders' equity section of the balance sheet and represent the total profit the business has earned and reinvested since it was founded, minus any dividends ever paid out. A growing retained earnings balance generally signals that the company is profitable and is building equity for future investment, while a negative balance (called an accumulated deficit) means cumulative losses and dividends have exceeded cumulative profits.
The retained earnings formula
The standard formula is: Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends Paid. Beginning retained earnings come from last period's closing balance sheet. Net income is the bottom-line figure from the income statement: revenue minus all expenses, taxes, and interest. Dividends paid is the total cash distribution to shareholders during the period. If you prefer to express dividends as a percentage of profits, multiply net income by the dividend payout ratio to get the dollar amount, then subtract that from net income to find how much was retained.
Retained earnings per share and the plowback ratio
Retained earnings per share (REPS) divides the ending retained earnings balance by the number of common shares outstanding. It shows investors how much accumulated equity sits behind each share. The retention ratio (also called the plowback ratio) is the complement of the payout ratio: Retention Ratio = 1 - Payout Ratio, or equivalently (Net Income - Dividends) / Net Income. A company retaining 80% of earnings is plowing 80 cents of every dollar of profit back into operations or the balance sheet, leaving only 20 cents per dollar for dividends.
How to use the 5-year projection
The schedule at the bottom of this calculator extends your current-period inputs across five years under constant assumptions: the same net income and the same dividend in each future year. This is useful for stress-testing: see how quickly the balance grows if the business maintains profitability, or how fast it erodes if dividends are set too high relative to earnings. For real-world planning, update the inputs each period with actual figures or adjust net income to reflect a growth rate. The projection is a starting point, not a forecast.
Retention ratio benchmarks by company type
| Company type | Typical payout ratio | Retention ratio | What it signals |
|---|---|---|---|
| Early-stage / growth tech | 0-5% | 95-100% | Reinvests nearly all profit to fund expansion |
| Established growth company | 10-30% | 70-90% | Balances reinvestment with modest dividends |
| Mature blue-chip | 40-60% | 40-60% | Consistent returns to shareholders, stable growth |
| High-yield / REIT / utility | 70-100% | 0-30% | Legally or contractually required high distributions |
| Accumulated deficit company | N/A | N/A | Losses have outpaced profits; priority is profitability |
Typical dividend payout ratios vary widely by growth stage and industry.
Frequently asked questions
What is the retained earnings formula?
Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends Paid. You find beginning retained earnings on last period's balance sheet, net income on the income statement, and dividends paid in the statement of cash flows or the statement of changes in equity.
Can retained earnings be negative?
Yes. When cumulative dividends plus cumulative losses exceed cumulative net income, the retained earnings balance turns negative. This is called an accumulated deficit. It is common in early-stage companies that are investing heavily, and it can also result from a period of losses or from paying dividends when the company had little profit.
What is the difference between retained earnings and net income?
Net income is the profit earned in a single period. Retained earnings are a running total, accumulated across every period the company has operated. Each period, the new net income is added to the previous retained earnings balance and any dividends paid are subtracted, giving the new closing balance.
What is the dividend payout ratio?
The dividend payout ratio is the percentage of net income paid out as dividends: Payout Ratio = Dividends Paid / Net Income. A 30% payout ratio means 30 cents of every dollar of profit goes to shareholders. The remainder, 70 cents, is retained. Enter a payout ratio directly in this calculator to have the dividend amount calculated for you.
What is retained earnings per share?
Retained earnings per share is the ending retained earnings balance divided by the number of common shares outstanding. It tells investors how much accumulated equity is attributable to each share, which is useful when comparing companies of different sizes or when tracking per-share equity growth over time.
Do retained earnings appear on the income statement?
No. Net income appears on the income statement, and retained earnings appear on the balance sheet (under shareholders' equity) and in the statement of retained earnings. The income statement feeds into retained earnings by providing the net income figure for the period, but the retained earnings balance itself is a balance sheet item.