Retained Earnings
Cumulative profits a company has kept rather than distributed as dividends, carried forward within reserves.
Formula
Closing Retained Earnings = Opening Retained Earnings + Net Profit - Dividends Paid
Unit
₹ crore
In depth
Retained earnings are the internally generated part of a company's capital, and the return earned on them is the sharpest test of management's capital allocation. If a company retains ₹100 crore a year and profits do not rise, the retention is destroying value and the money would have been better paid out. This is the reasoning behind the incremental return on retained earnings test that long-term investors apply. Retained earnings are not cash and are reduced by accumulated losses, so a long-loss-making company can carry negative retained earnings that push total equity below zero.
Worked example
Opening retained earnings ₹300 crore, net profit ₹90 crore, dividends ₹25 crore. Closing = 300 + 90 - 25 = ₹365 crore. Over five years the company retains ₹325 crore; if operating profit has not risen, that capital has earned nothing.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Retained Earnings” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.