Retained Earnings Calculator — Statement of Changes
Calculate ending retained earnings for any period: enter the beginning balance, net income (or loss), and dividends paid to get the closing retained earnings balance and the retention (plowback) ratio.
Cumulative profit kept in the business at end of period
- 1
Beginning balance + Net income
50,000 + 20,000 = 70,000 - 2
Subtract dividends paid
70,000 − 5,000 = 65,000Dividends reduce retained earnings as profits leave the business.
How does this calculator work?
Ending Retained Earnings = Beginning RE + Net Income − Dividends Paid. Retained earnings accumulate over a company's life as undistributed profits reinvested in the business. The retention ratio = (Net Income − Dividends) / Net Income shows the fraction of profit kept; its complement is the dividend payout ratio.
Formula
How this is calculated
Retained earnings is the cumulative portion of a company's net profit that has been kept in the business rather than distributed to shareholders as dividends. It appears in the equity section of the balance sheet and changes each period by a simple formula: Ending RE = Beginning RE + Net Income − Dividends Paid. A net loss reduces retained earnings; dividends distribute profit out of the business.
The retention ratio (also called the plowback ratio) measures what fraction of net income is retained: Retention = (Net Income − Dividends) / Net Income. The complement, the dividend payout ratio = 1 − Retention = Dividends / Net Income, shows what fraction is distributed. High-growth companies typically retain most earnings to fund expansion; mature, stable companies distribute a larger share.
Retained earnings can be negative — called an accumulated deficit — when cumulative losses exceed cumulative profits. This is normal for early-stage companies or businesses that have sustained losses. For a realistic model, note that the period covered, the currency, and any prior-period adjustments (e.g., restatements) should match your accounting standards (IFRS or US GAAP) — this calculator performs the arithmetic only.
Frequently asked questions
Yes. When cumulative losses exceed cumulative profits, retained earnings become negative, called an accumulated deficit. This often appears on balance sheets of start-ups or companies that have paid large dividends in excess of earnings. It is recorded as a negative number in the equity section.
Retained earnings is an equity account representing the cumulative undistributed profit; it is not necessarily held as cash. The company may have used those retained profits to buy equipment, pay down debt, or fund operations. Cash is a separate asset account on the balance sheet.
The retention (plowback) ratio is used in growth models: the sustainable growth rate ≈ ROE × Retention ratio. A high retention ratio, combined with a high return on equity, implies faster reinvestable growth. It is a key input to the Gordon Growth Model for stock valuation.
Also known as
TG we-Calculate Editorial Team. (2026). Retained Earnings Calculator — Statement of Changes [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/retained-earnings-calculator
TG we-Calculate Editorial Team. "Retained Earnings Calculator — Statement of Changes." TG we-Calculate. 2026. https://we-calculate.com/calculator/retained-earnings-calculator.
TG we-Calculate Editorial Team, "Retained Earnings Calculator — Statement of Changes," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/retained-earnings-calculator
@misc{wecalculate_retained_earnings_calculator, title = {Retained Earnings Calculator — Statement of Changes}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/retained-earnings-calculator}}, year = {2026}, note = {TG we-Calculate} }
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