What are Retained earnings?

Retained earnings (Definition)

Retained earnings are the portion of a company's profits that is retained for reinvestment rather than being distributed as dividends. They are recorded in the shareholder's equity section of the balance sheet at the end of each accounting period. Retained earnings can be used for a variety of purposes, including working capital and fixed asset purchases (capital expenditures), or they can also be used to pay off debt. The Statement of Retained Earnings is a summary report that details the changes in retained earnings throughout the course of a specific period, and at the end, a significant amount of retained earnings reflects a healthy business.